It is a proud moment in a person’s life when the buy their first home. However, buying a home and keeping up with it can sometimes prove to be difficult for people. Sometimes, homeowners may face certain financial burdens due to the real estate market. Homeowners may find themselves struggling to pay their mortgage if the value of their home drops. This may be the case if they bought their home at the top of the market or fell victim to a financial scheme. Homeowners who are in debt because their mortgage is more than the value of their home may begin to think about a short sale. When facing these situations, it is important to retain the services of an experienced real estate attorney to represent their best interests.
What is a Short Sale?
Homeowners in difficult financial situations sometimes turn to short sales. This is when a lender takes a loan payoff that is less than the value of the mortgage. In order for a short sale to be complete, the lender must approve the payoff and the seller cannot receive any of the money. The closing costs are then paid off by the bank.
This can be a beneficial option for homeowners that have solely real estate debt, nothing more. This is because a short sale can impact a homeowner’s credit. However, it is important to know that this impact is lesser than in bankruptcy or foreclosure.
Are Short Sales Guaranteed?
As previously stated, lenders must approve a short sale. It is because of this that the homeowner must prove that they are unable to afford their mortgage. If there is any evidence that they can afford it, they may be unable to participate in the short sale program. This is why short sales are not always guaranteed. In addition to this, there are other factors that can affect whether or not a short sale is successful. For example, a lender may reject a payoff that was offered if there are multiple loans. Other examples may consist of mechanic’s liens, tax liens, outstanding homeowners or association dues, and liquid assets that can cover the shortage of the loan.
Short sale agreements often include a condition that holds sellers liable for the shortage. This is called a deficiency. Homeowners are not off the hook because a lender agreed to a payoff that is less than their mortgage. Financial situations are subject to change over time, which is why homeowners may need to pay the remaining amount if they can afford the difference in the future. Depending on the terms of the sale, a lender could pursue the full payment with some exceptions.
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Friedman Schuman is an experienced and dedicated legal resource for clients throughout Pennsylvania. We proudly serve clients facing a wide range of legal matters. If you require the services of an effective attorney, please contact Friedman Schuman today to schedule a consultation.