In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor (or rather the lender allows the home to be sold for less than what is owed to the lender currently). The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender usually for full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation as well as the negotiating powers of the person negotiating your short sale. Law firms can add credibilty, because the lenders/servicers may be worried about the threat that attorneys have.
In short; a short sale is negotiating with lien holders for a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.
Lenders have a department (typically called a loss mitigation or work-out department) which processes potential short sale transactions, and these are the departments that we directly negotiate with. In all of our short sales transactions deficiency judgments, issurance of 1099 and credit report inferences are always a negotiation point with the lender.
In the United States the number of short sales being accepted by lenders rapidly grew during 2007, 2008 and 2009 and are expected to reach record levels in 2010.
Working with Real Estate Agents/Brokers: Many people are using real estate agents/brokers these days to negotiate their short sales, and this is great as many of them are excellent at what they do, however we do recommend using an attorney in the process. Either to assist with the negotiations for an approval if needed or to review the contracts and approvals sent by the lender to make sure your legal interests are adequately protected. Real estate agents are not attorneys and are also subject to liability for guiding their clients in the wrong direction or not informing them of any legal liability they may be facing, so utilizing an attorney helps all involved, real estate agent and homeowner. For our full service short sale negotiations we include deficiency judgment, 1099 issuance and credit report negotiations for every one of our short sale or deed in lieu of foreclosures. We also offer these services on an ala carte basis. We work with realtors all the time.
For further information or to discuss getting help with bankruptcy, short sales, or foreclosures we invite you to schedule a free confidential consultation with our experienced northern and southern California bankruptcy attorneys by calling us at 916.983.2941, or filling out our contact us form on our website. The confidential consultation is free.