Owning a home comes with a sense of pride and accomplishment. However, some homeowners can face certain financial burdens due to the real estate market. They can find themselves struggling to pay their mortgage if the value of their home dropped. This can happen if the individual bought their home at the top of the market or was a victim of a financial scheme. When a homeowner is in debt because their mortgage is significantly more than the value of their home, they may wish to consider a short sale. When an individual finds themselves in these situations, a New York City real estate attorney can represent their best interests.
What is a Short Sale?
When a homeowner is facing a difficult financial situation, they may turn to a short sale. A short sale is when a lender takes a loan payoff that is less than the value of the mortgage. It is important to know that a short sale can impact a homeowner’s credit. However, it does not affect their credit to the extent that bankruptcy or foreclosure would. A short sale can be the right option for a homeowner if their debt is solely real estate. In order for a short sale to go through, the lender is required to approve the payoff and the seller cannot receive any of the proceeds. The sale’s closing costs are then paid by the bank.
Are Short Sales Guaranteed?
Because a lender must approve the short sale, it must be proven that the homeowner cannot afford their mortgage. If there is any evidence that they can, they may be rejected from the short sale program. It is because of this that they are not guaranteed. There are several other factors that can impact whether or not a short sale is successful. If there are multiple loans, a lender may reject the payoff that was offered. Other factors can include mechanic’s liens, outstanding homeowners or association dues, tax liens, and liquid assets that can cover the shortage of the loan.
Often times, short sale agreements include a condition that holds the seller liable for the shortage. This is known as a deficiency. Homeowners are not necessarily off the hook simply because a lender agreed to a payoff that is less than the mortgage. Financial situations can change over time. Because of this, if it is believed that the homeowner may be able to afford the difference in the future, they can be held accountable for paying the remaining amount. In some cases, depending on the terms of the short sale, a lender could pursue full payment with certain exceptions.
Contact our Firm
Zimmet Law Group, P.C. is an experienced team of attorneys guiding clients through matters of estate planning and administration, divorce and family law, real estate, commercial litigation, business law, bankruptcy, and landlord-tenant law. If you require the services of an effective New York City attorney, contact our firm today to schedule a consultation.