When hardships create financial difficulties for homeowners, a short sale can offer a viable solution. A short sale attorney can explain the advantages and disadvantages of a short sale, as well as other options that provide mortgage debt resolution.
What is a Short Sale?
A short sale is any sale where the lender allows the homeowner to put the property on the market for less than the remaining value of the mortgage. The lender keeps all of the proceeds from the sale, and forgives the rest of the loan as a discharged debt. In most cases, both parties are satisfied by the arrangement. The homeowner escapes unaffordable mortgage payments, and the lender recoups money on the property without the hassle of foreclosure and sale of the property.
Homeowners who lose their jobs or face other financial hardships often find that they can no longer afford their mortgage. Whether the homeowner is behind on mortgage payments or owes more on the home than it is worth, a short sale attorney can often negotiate a short sale agreement with the lender as a way to avoid foreclosure or bankruptcy. A short sale can negatively impact the homeowner’s credit score, but it is not as damaging as a foreclosure or bankruptcy.
Qualifying for a Short Sale
Working with a short sale attorney, a homeowner must provide acceptable evidence of an unforeseen hardship to the lender. The hardship must have created a financial situation that makes it impossible for the homeowner to honor the terms of their mortgage agreement. Acceptable hardships include:
- Unemployment – A sudden job loss is one of the most common financial hardships for homeowners. The unemployment hardship can also be applied to homeowners who become ill and are unable to work for an extended period of time.
- Significant Decrease in Home Value – A sharp decrease in property value often results in “under-water” mortgages. The 2007-2008 housing crisis in Las Vegas prompted many foreclosures, bankruptcies and short sales.
- Relocation – If a homeowner is forced to relocate for a job early in the mortgage, it can create an “upside down” situation where the loan is more than the value of the home. A short sale may be necessary to sell the home.
- Divorce – In a divorce, one spouse may not be able to afford the home alone. A short sale can be an equitable way to settle the mortgage debt and avoid foreclosure.