A short sale occurs when the money being made from the purchase of a home is not enough to cover any debts that are attached to that property. It’s often done when the owner can’t afford to repay any mortgages or liens, and he or she is forced to sell the property for less than what was originally paid.
This type of sale is often used as an alternative to a foreclosure, but it can have a negative impact on your credit history. The bank agrees to release the debt once the sale goes through, even though the purchase price won’t be enough to cover it.
Short Sale Process
Before a homeowner can initiate a short sale, he or she has to prove some sort of financial hardship, which is sent to a “loss mitigation department” for evaluation. They have a set of standards by which they evaluate every application, and they hire an independent appraiser to determine the “current market value” (CMV) of each property. They use all this information to determine a homeowner’s eligibility for a short sale.
To apply, the homeowner must put together a package to prove that he or she is undergoing some type of financial hardship, and it should be included with a letter from an attorney. However, it would be a good idea to talk to him or her before you decide to initiate the short sale process. A real estate attorney will be your best resource in not only determining if you can qualify for a short sale but also in how to include the right documentation with your application.
Consequences of a Short Sale
While a short sale is often used as an alternative to a foreclosure, it can have an adverse effect on your credit report. The good news is that it won’t do as much damage as a foreclosure, but you may have more difficulty getting another mortgage in the future. Be sure to talk to an attorney about any of the potential losses or consequences about initiating a short sale. He or she will be able to prepare for any issues that may arise, especially when it comes to applying for another mortgage.
Due to some recent developments, more homeowners are getting a second chance if they have had a financial hardship due to matters beyond their control. You might have suffered a loss because of a period of unemployment, or you might have had a serious reduction in your income. Much of this has been in response to the recent economic crisis, which has resulted in an increased amount of foreclosures.
Homeowners can take certain steps to help them get another mortgage if they have had a short sale. They must get a letter from the lender, which should state that the property closed as a short sale and not as a foreclosure. And they should get a copy of their credit report from all three bureaus. Homeowners should also get “pre-approval” from the lender before they apply for another mortgage. Be sure to talk to a real estate attorney to help you prepare for any problems that could come up later on.
Using a Real Estate Attorney
If you’re thinking about doing a short sale on a home, you need to understand the potential consequences, and a real estate attorney will be able to help you take certain steps to minimize your chances of getting denied for a new mortgage. Whatever the circumstances, you might be able to get a second chance once your situation improves, and a real estate attorney will be your best chance in making sure your credit isn’t damaged beyond repair.
Of course, you always want to do your due diligence while you’re looking for the right person, as it could save you a great deal of time and frustration down the road. Not to mention, the monetary losses that could come with it.
You always want to shop around, and you want to make sure you ask detailed questions about the experience and expertise of every person you call. You should also check with your state’s Bar Association to see if they have had any hearings or investigations in the past. This can help you decide if that person is legitimate.
Our law firm has a team of experts who can help you with every aspect of real estate law, and they can work on your behalf to make sure you are protected. If you want to find out how we can help you get in touch with us today!