27-Oct-2009
by Attorney, Laura Bramnick Can you answer “yes” to one or more of the following questions:
- Is the current market value of your home less than the amount you owe on your mortgage?
- Have you missed any mortgage payments recently?
- If your payments are current, are you struggling to make them every month?
- Do you have a change in circumstances since you qualified for your current mortgage?
If you answered yes to any one of these, you may want to learn more about short sales. The short sale is an actual sale of your home. Your property will be listed for sale with a licensed real estate agent of your choosing, placed on the MLS, so prospective buyers can offer to purchase the property. This is different than a traditional sale because your lender or lenders must approve it since they are going to receive less than the amount you owe. There are several benefits. You can get rid of a mortgage you can no longer afford. You can avoid foreclosure, also known as trustee sale. You can limit the negative impact on your credit. You can qualify for a new mortgage in approximately two years. This may allow you to take advantage of the down real estate market. Predictions are that recovery of our real estate market will take more than two years. Short sale is not without its downside. The process will take several months. Lenders may contact you often by telephone and by letter. The buyer may get tired of waiting and then you have to find another buyer. You may have some financial liability. In other words, you may owe money to your lender. It is extremely important to talk to an attorney about the short sale process and how it applies to you, but the most important reason is to determine whether you are protected by Arizona’s Anti Deficiency Statute. The purpose of this law is to protect you from being sued by your lender for any deficiency. It is important to point out that this law applies to foreclosure, but attorneys are using it as leverage when we negotiate with lenders to approve your short sale. Most of the time lenders will agree to release you from payment of the mortgage debt when they approve a short sale. Every situation is different, however, and you need to have your personal situation evaluated. What things do lenders consider when they evaluate a request to approve a short sale?
- Hardship – what has changed since you took out the mortgage
- Budget – can you show that you can no longer afford the payment
- BPO – this is the lender’s evaluation of the current market value of your property
- Net – how much will the lender actually receive after closing costs are paid
An attorney and Realtor work together for your benefit if you decide to proceed with a short sale. We offer free seminars several times throughout the month on the topic of short sales and loan modifications. Please go to the Free Events tab of this website and view our upcoming seminars. If you would like to attend, please register for the specific seminar you are interested in. Seminar attendance entitles you a reduced consultation fee if you would like to set up a meeting with an attorney.