In terms of real estate, a short sale refers to a home seller’s lender agreeing to accept less money than is owed on the mortgage balance, in return for releasing their lien on the property.
However, when you as a homeowner are considering a short sale, because you need mortgage debt relief, you definitely should have someone looking out for your interests. It’s crucial to have legal representation, because it is important to note that when a lender agrees to a short sale, what they’re really agreeing to is to “release the lien” on the home so that it can be sold. They are not by any means necessarily agreeing to release you from the legal obligation to pay off the remainder of the mortgage loan.
This is exactly why at Short Sale Legal Services we make sure you have an attorney who is skilled in negotiations that will negotiate everything with your lender(s), AND also importantly, provide you with the expert legal guidance that should accompany matters of such significance.
Of course, a lender does not have to agree to accept a short sale payoff. Despite what you may have heard or read, especially regarding all of the government/TARP related programs, a lender is under no obligation to accept a short sale. There are a few conditions that must be present for a lender to agree to a short sale. Chief among these are:
A. The home seller must be facing some kind of financial hardship. There are many different types of ‘hardships’ that qualify to satisfy this condition (loss of job, loss of income, medical bills, divorce, death, forced job relocation, etc.), but basically, one must be able to demonstate that their financial situation has substantially changed compared to when the mortgage was first obtained.
B. The current market value of the home must be less than the mortgage balance owed. This is ususally not a difficult obstacle for most home sellers. In fact, if this were not the case for the vast majority of home sellers accross the United States, then short sales would not be anywhere as near as prevalent as they are. Home values in the metro-Detroit area have fallen between 30% – 50% during the last few years since the financial and banking collapse of 2007.
In Michigan, especially the metro-Detroit area, it has been estimated that the overwhelming majority of all home owners who purchased a home between 2004 – 2008 are now upside-down!
Incredibly, L. Brooks Patterson and other leading business and economic forecasters have recently predicted an additional 20% – 25% drop in home values in the tri-county area surrounding Detroit.
