The Short Sale

• What is a short sale?
  A short sale might occur when a home owner can no longer afford to make their mortgage payments. They can work out great if you need to sell your home quickly in order to avoid foreclosure. The bank or mortgage lender may agree to the terms of a short sale since it is often less costly than allowing the home to foreclose. The bank reserves the right to approve or disapprove of the final sale price and the terms. In some cases a short sale settles the entire debt with the bank, but in other cases there may be a deficiency balance that must be settled.


• What is a loan modification?
  It’s a permanent change in the mortgage agreement that allows the bank to adjust your monthly payments or total loan amount so that you can afford to remain on the property. Legal costs, foreclosure fees and delinquent balances may be re-applied to the principle of the loan. You must qualify for a loan modification.


• Can I avoid foreclosure?
  While there maybe several ways to avoid a foreclosure, it’s best to ask a real estate lawyer to review your situation. Selling your home may be your first option if the market is favorable and the transaction can be completed before foreclosure proceedings have begun. You might be able to negotiate a “short sale” with the lender to list your home at current market value. If you are unsuccessful at selling your home you can try to offer a deed in lieu of foreclosure. This involves handing the deed back to the lender and being released from the mortgage. If you want to remain in your home, you may be able to re-negotiate the terms of your mortgage through a loan modification which will reduce the amount of your monthly payments.


• Who qualifies for government “bail out” programs?
  There are no programs for home owners that we know of that are called “bail out” programs. Although anyone who has a mortgage insured by the FDIC may qualify for some assistance under the following conditions:
  
  • You are behind on your mortgage.
  • You currently live in your home.
  • You have not filed for bankruptcy
  • Your unpaid principle is more than 90% of the value of the property
  • You can prove that financial hardships are the cause of your situation


• What can I do to keep my home if I can’t afford it?
  You may try to approach your lender and ask for a loan modification. Your lender will review your finances and the condition of the property and then may lower your payments so that you can afford them. Sometimes creating a new loan, all of the late charges and delinquent payments will be waived.


• I want to sell my home but I’m “upside down.” Can I?
  A “short sale” may be the best solution if your mortgage is more than the appraised value of your home. By selling your home at a value less than your current loan amount, you may be able to attract prospective buyers and sell your home before foreclosure proceedings start. Just remember that the lender has the right to say no to offers that are too low.


• Is it true that I can negotiate with banks to lower my loan amount?
  If you are suffering from serious financial hardships, you should approach your lender and ask for a loan modification. The lender may inspect the property and conduct a financial review of your assets before deciding whether or not to lower your monthly payments to fit your budget.


• How can I stop foreclosure?
  In some cases foreclosure proceedings may be delayed by simply communicating with your lender. While some lenders may be aggressive and start foreclosure procedures as soon as possible, others might take the time to work out a plan that may lower your monthly payments and keep you in your home.


• What is a notice of default?
  Lenders file a Notice of Default with public records as soon as you are 60 days behind on your mortgage payments. This is a warning that your house can be seized if the account is not paid up. The lender will give you 90 days to make up the back payments and reinstate the loan. If you do not meet the deadline, foreclosure proceedings may begin on your property. Again, this is a good time to consult with a real estate lawyer about your options. The information in this report is for general guidance only and is not intended to direct you toward any particular decision. It is recommended that you consult a professional to assist you in determining what your options are since most circumstances are unique.