Due to falling housing values and creative financing offers, many homeowners today find themselves “underwater” or owing more on their mortgage than their house is worth. This can be a major problem. If you want to sell your home because you can no longer afford the payments, need to move to a new location for career or family reasons or if you are just open to the idea of selling your home, getting away from the debt and starting over, a short sale may be the answer.
A short sale is a preferable alternative to foreclosure and is an option for people who need to sell a home for less than the balance owed on the mortgage. A short sale has many advantages for homeowners, but negotiating the terms of a short sale can be a complex process.
The best way to ensure that you are able to negotiate a short sale arrangement that protects your legal and financial interests is to work with an experienced Florida foreclosure defense lawyer. At the Law Offices of Evan M. Rosen, we provide comprehensive and dedicated legal representation to clients who are facing mortgage trouble and need to sell their homes
. Short sales are just one of many avenues we can help you to explore. In every case, we will put your interests and needs at the forefront.
We will review your financial situation, help you to formulate a plan of attack for resolving your mortgage problems and fight vigorously to protect your rights with your mortgage lender. You are welcome to read more about short sales below or you can contact us now for a FREE CONSULTATION by calling 754-201-3826 or by filling out our online form.
Understanding Short Sales
A short sale happens when a home is sold for less than the full balance owed on the mortgage. Normally, when a home is sold, the mortgage lender is repaid in full on closing day from the proceeds of the sale. If a house sells for less than what is owed, the borrower would have to bring cash to the table to close the deal and pay off the lender. Unfortunately, many borrowers do not have the extra cash and many borrowers who do have the money need it to fulfill other personal or financial goals. A short sale provides a solution.
Some lenders have programs in place to facilitate short sales, and short sales have become far more common and standardized due to programs such as the Home Affordable Foreclosure Alternative (HAFA) program that provides loan servicer incentives for short sales. However, while there are standard rules in place for short sales, the specific terms under which the lender agrees to permit the sale of the home for less than the full balance due will be negotiated by the homeowner and lender.
It is important for the homeowner to make sure certain protections are included in the short sale agreement. Homeowners may also wish to explore their eligibility for government incentives for short sales, which may involve homeowners’ receiving as much as $3,000 or more to cover the cost of moving expenses. There have been various news stories regarding homeowner’s who have received as much as $40,000 to consummate a short sale.
At the Law Offices of Evan M. Rosen, we understand what terms must be in a short sale agreement to provide necessary protections to homeowners. We will work with you and your lender to draft an advantageous short sale agreement that best protects your interests. We can also assist you in finding a real estate agent who specializes in short sale arrangements to facilitate finding a buyer for your home. Finally, as a title agent, we can help to close the real estate transaction for you with no additional fees. This makes it easier for you to find a buyer, negotiate with a lender, get the deal done and move on with your life.
Negotiating a Short Sale Agreement
When negotiating a short sale agreement, there are a few essential issues that the homeowner must address with the lender in order to be protected. These issues include:
- Deficiency judgments – Florida is a recourse state, so mortgage lenders that do not recover enough from a foreclosure sale to fully cover the principal due on the mortgage and their costs can pursue legal action to get additional money from homeowners after foreclosure. This is typically done at the end of a foreclosure in an evidentiary hearing on a motion for deficiency judgment or via a separate lawsuit. You do not want to give your lender an opportunity to come after you in court for the difference between the money obtained from the sale of the home and the balance owed, so you should negotiate a waiver of deficiency in which the lender gives up the right to sue.
- Cash to close – Typically, if your home sells for less than the mortgage balance, you would need to pay the difference at closing. You should negotiate with the mortgage lender to ensure you do not have to pay anything to close the sale of your home. The lender must agree to accept the resulting payoff based solely on the fair market value, after deducting for standard closing costs and Realtor fees, as full satisfaction of the mortgage loan. Under Florida law, the lender would then have 60 days to file in the public records, a satisfaction and release of the mortgage lien.
- Dismissal of any pending proceedings – If your lender has already originated foreclosure or other legal proceedings against you, you must negotiate for a dismissal with prejudice of the pending proceedings. If your case is dismissed with prejudice, the lender cannot pursue further legal action against you arising out of the mortgage loan.
- Credit reporting – Foreclosure can have a major adverse impact on your credit, and a short sale is a far better option. Whenever possible, you want to negotiate with your lender to report positive information to the credit bureau so you will not have a black mark that prevents you from getting future credit.
- Tax issues – When debt is forgiven, lenders traditionally have to send a 1099 form to the IRS, reporting the unpaid balance as income. This can create a significant tax burden as you may be obligated to pay the IRS tax on the amount of the mortgage balance that was forgiven. You may wish to negotiate with the lender not to issue a 1099 and/or consult with tax professionals as to how any potential tax liability can be resolved. While we cannot give tax advice, we can certainly steer you in the right direction.
At the Law Offices of Evan M. Rosen, we understand how to negotiate these issues with your lender, and we will assist in ensuring that your short sale agreement contains the protections necessary so you can walk away from the home sale and move on with your life unencumbered. We can also help you explore all possible incentive programs that offer cash to cover moving and other expenses after a short sale.
Contact Our Florida Foreclosure Defense Attorneys Today
Short sales have become very common in Florida, but that doesn’t mean they are easy. It helps to have a trusted advocate on your side to take the stress out of the process and to negotiate a fair deal that helps you to transition out of owning your home without having to suffer financial loss. At the Law offices of Evan M. Rosen, we will work with you on short sales or other mortgage resolution options so you can achieve the best possible solution to your mortgage issues.
Contact us today at 754-400-5150 or through our online form to schedule a FREE CONSULTATION to learn more.
Home ownership has long been promised as the American Dream, but many Americans were misled by banks and lenders and many are suffering the consequences. With a short sale or other loan resolution, you can get back on the right path. Let the Law offices of Evan M. Rosen guide you back on the road to financial success.