Some homeowners may face financial burdens due to the real estate market and might find themselves struggling to pay their mortgage if the value of their home has dropped. This might occur if a homeowner bought their house at the top of the market. It may also occur if the individual 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 consider a short sale. If you have found yourself in this situation, continue reading and reach out to our New York City real estate attorney who can represent your best interests.
What is a short sale?
Homeowners who are facing financial hardship may turn to a short sale. A short sale occurs when a lender takes a loan payoff less than the value of the mortgage. A short sale can impact a homeowner’s credit. However, it does not affect their credit as much as bankruptcy or foreclosure would. If a homeownership’s debt is solely real estate, a short sale may be the right option. The lender is required to approve the payoff and the seller can’t receive any of the proceeds for a short sale to go through. The sale’s closing costs are then paid by the bank.
Are short sales guaranteed?
It must be proven that the homeowner cannot afford their mortgage for a lender to approve the short sale. If there is evidence that the homeowner can afford their mortgage, they may be rejected from the short sale program. Short sales are not guaranteed.
There are a few other factors that may also impact the success of a short sale. A lender may reject the payoff that was offered if there are multiple loans. 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.
In some cases, short sale agreements include a condition that holds the seller liable for the shortage which is known as a deficiency. Just because a lender agreed to a payoff that is less than the mortgage does not mean that the homeowner is off the hook. The financial situation can change. If it is believed that a homeowner may be able to afford the difference in the future, they can be held accountable for paying the remaining account. Depending on the terms of the short sale, a lender could pursue full payment with certain exceptions.
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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.