Tag Archives: short sale

5 Potential Problems with Short Sales

Are you facing foreclosure? One strategy some people try to use in this situation is a short sale. A short sale is when you negotiate to sell your home for less than you owe on the mortgage and have the lender release the lien on the property.

While this might seem like a simple solution, there are a number of risks associated with short sales. For example, in last week’s blog we talked about deficiency judgments, which could make you liable for the rest of what you owe on your mortgage even after you’ve sold the property. This week, we’re going to talk about some of the other potential problems you could encounter with a short sale.

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Deficiency Judgments: Are Short Sales Worth the Risk?

If you’re facing foreclosure, you may have done a little research on a short sale as a means of avoiding foreclosure. A short sale is when you sell your home for less than you owe on your outstanding mortgage debt, and the lender releases the lien on the property.

This might sound like a great option, but there is a lot of risk that comes with short sales. There are a number of things that can delay the proceedings or even stop them altogether. And even after the sale is complete, you might not be off the hook for the remainder of what you owe. This week, we’ll focus on the later risk, the risk that you could still owe a lot of money even after the short sale is over. This is called a deficiency judgment.

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How a Short Sale Saves You Money

Last week we talked about how deficiency judgments work, and in what situations banks are authorized to seek a deficiency judgment. We also talked about how banks may be willing to waive their right to a deficiency judgment if the property owner chooses to go the short sale route.

This is just one of the ways a short sale can save you money. Lenders stand to recoup much more in a short sale than they do a foreclosure, which means they may be more likely to cut their losses, which saves you from having to pay the remaining value of the property. While they aren’t without costs of their own, short sales are less expensive than foreclosures. According to the U.S. Congress Joint Economic Committee, the average cost of a foreclosure for a property owner is $7,500, which isn’t cheap. Depending on the severity of your financial situation and your ability to keep up with payments, the cost of foreclosure could be simply too much to bear, making bankruptcy the only option. By opting for a short sale, homeowners can avoid the costs of foreclosure and the threat of bankruptcy, and retain more control over their financial situation than they would in a foreclosure.

If your lender is foreclosing on you, keep in mind that they may be willing to go the short sale route. If you’re facing foreclosure and considering a short sale, you should know that finding a buyer for your home doesn’t have to be a difficult process. Gray’s Home Solutions will buy your home quickly. We’re looking for properties of all types across the state of Maryland. Whether your house is in pristine condition or if it has seen better days, we’ll make an offer fast. Best of all, in addition to our speed, you pay no fees or commissions when we buy your home.

Even if you’re not looking for a buyer, you can participate in our sellers referral program. Here’s how it works. Send us the phone number and property address for a For Sale By Owner or vacant property. We’ll take a look, and if we buy the property we’ll pay you $250 as a thank you for providing the lead.

Are you interested in learning more about selling your home fast? Our ebook has a ton of great information for you. We also have an ebook with information on how to avoid foreclosure, available for download here. They’re both free, so give them a look. You can also connect with Grays Home Solutions on Facebook, Twitter, Google+, and LinkedIn for more real estate made simple.

Source

http://home.howstuffworks.com/real-estate/10-benefits-of-short-sale-over-foreclosure.htm#page=3

What is a Deficiency Judgment?

A deficiency judgment is a legal process that can occur either after a foreclosure, or after a short sale. Basically, a lender can use a deficiency judgment to attempt to get the rest of the money they are owed that they didn’t get from a foreclosure or short sale. For example, if a property is worth $150,000, and it was sold at a short sale for $100,000, the lender can file a deficiency judgment to try to get the remaining $50,000 of the property’s value. The lender has to go through the court system and file a lawsuit to do this, and if it is successful, your wages can be garnished or bank account levied as a means of paying back the remainder of the loan.

Many states prohibit lenders from filing deficiency judgments after a foreclosure, and three states prohibit them after a short sale. However, Maryland does not prevent deficiency judgments after foreclosures nor short sales. A lender can seek a deficiency judgment up to three years after a foreclosure.

So how do you prevent the lender from seeking a deficiency judgment? One option is to negotiate with the lender during the short sale process. You can attempt to get them to waive their right to seek judgment or, if they refuse, you can try to make a settlement offer of a smaller amount. The lender may be willing to do this because collecting a deficiency judgment is both time consuming and costly. A more risky option is to take the chance that, because of the difficulty of the process for the lender, they may decide not to sue you for deficiency. They may send you letters demanding payment, but they can’t actually freeze your bank account or garnish your wages unless they file a suit.

Negotiating with a lender during the short sale or foreclosure process can help prevent the threat of a deficiency judgment. If you’re considering a short sale and are concerned about a deficiency judgment, Gray’s Home Solutions can help you through the process and save you time by buying your home quickly. We’re looking for properties of all types across the state of Maryland. Whether your house is in pristine condition or if it has seen better days, we’ll make an offer fast. Best of all, in addition to our speed, you pay no fees or commissions when we buy your home.

Sources

http://www.nolo.com/legal-encyclopedia/how-avoid-short-sale-deficiency-judgment.html http://www.nolo.com/legal-encyclopedia/deficiency-judgments-after-foreclosure-maryland.html

How Lenders Benefit from Short Sales

Lenders are in a unique situation when it comes to foreclosures. By foreclosing on a house, they’re expressing their intent to recover money that’s owed them, but they end up having to spend a lot of money in the process. Court costs in the foreclosure are quick to pile up. Not only is foreclosure an expensive prospect for a lender, it’s also time consuming. The process can take a long time to get through all the litigation, especially in Maryland, where the average foreclosure timeline is about a year and a half. The old adage “time is money” couldn’t be more true here. Not only does foreclosing cost a lot, but holding a foreclosed property presents a financial burden to the lender. The property may require renovations, and it will certainly require a real estate broker to sell it.

This is why lenders benefit from short sales. They avoid the lengthy and expensive foreclosure process and also avoid having the costs that come with selling the property after its acquisition. Short sales often reduce a lenders loss to a level that’s acceptable to just write off, which is easier and less expensive than going through foreclosure.

Source

http://www.washingtonpost.com/local/thousands-of-marylanders-are-losing-homes-in-second-wave-of-foreclosures/2013/08/10/859bbfde-fde5-11e2-96a8-d3b921c0924a_story.html

http://home.howstuffworks.com/real-estate/10-benefits-of-short-sale-over-foreclosure.htm#page=4