SHORT SALE LAW
What is a Short Sale?
Foreclosures are at record highs, leaving banks with burden of selling off homes to recoup their money in a time when few people are buying. At the same time, borrowers are drowning financially in homes they can no longer afford to pay for. Short sale is a way for both parties to minimize their losses.
Short sale is a process in which your bank agrees to you selling your home for less than you still owe on the mortgage and forgive the remaining balance. Essentially you are “shorting” the bank on your mortgage. It allows you to escape from a mortgage payment you cannot afford and generally costs the bank less than taking your home through foreclosure. Everyone wins: you get out of your home that you cannot afford, the bank saves money and buyers can scoop up houses for a fraction of the market value.
If you are struggling to pay your monthly mortgage payment or are already several months behind, short sale may be a way to avoid foreclosure in Miami. Foreclosed homes are a burden on the bank because the process costs them money and then they have to sell the home in an effort to get some of the money they invested back. Do not wait to contact a Miami foreclosure attorney if you are behind on payments. Waiting too long puts you at risk of being foreclosed upon or even being forced to file bankruptcy. If you have already tried to modify your mortgage and were turned down or still cannot afford the payments, a short sale may be a good option for you.
The bank is usually forgiving some of your debt, which means that short sales Miami may still impact your credit score. But a foreclosure or bankruptcy on your credit is far worse. Also keep in mind that the bank does not always agree to forgive the outstanding mortgage amount, so read documents carefully. If your lender determines your finances are too strong, or if you own multiple properties, they many require you to pay the outstanding balance. If the remaining balance is not forgiven, you will still have eliminated a large portion of your mortgage.
When looking for a buyer, make sure they are not only aware that it is a short sale but also that they understand what it means. Short sales in Miami do not mean “quick” sales. Once your lender has approved the offer and the buyer has secured financing everything will happen quickly, but just getting your bank to respond the offer could take a month. Make sure they know what you can afford to fix in the home, which is probably nothing. Your buyer needs to understand if your property is a fixer upper they are purchasing as is. Ensure the buyer knows how short sale works will minimize the chances they will back out at the last minute and send you into foreclosure.
Who should utilize a Short Sale?
Short sale is a process used when a borrower cannot afford to make their monthly mortgage payments. The borrower approaches their lender and requests to sell the property for less than the outstanding amount in exchange for the bank forgiving the remaining amount. If the borrower can prove they are suffering from an extreme financial situation, the bank may decide that a short sale is in their best interest to avoid having to foreclose. If you are already several payments behind, short sales in Miami may help you avoid a foreclosure. The only way to determine if short sale may work in your situation is to contact Miami foreclosure attorneys. There are a many situations that might warrant a short sale.
- You cannot afford your home and want to get out. Short sale is a last ditch effort to avoid a foreclosure. If you want to keep your house, a short sale is not the path to take. Consider refinancing, loan modification or even bankruptcy if you want to keep the property.
- You are worried that you will go into foreclosure in Miami. If you are already in foreclosure, a short sale will not usually be an option. You should consider short sales Miami before the foreclosure process begins. A foreclosure will stay on your credit for up to ten years, while a short sale does show up on your score it is much less damaging.
- If you are already several months behind on your payments. Banks will not consider your request for a short sale if you are up to date. They want you to repay the entire loan if you can. That is how they make profits. If you are able to make the payments you should. You will have to provide the bank with all your financial documents in order to apply for a short sale.
- If your financial situation has changed dramatically and is not likely to get better any time soon. You will lose your home, keep that in mind. If you have been unemployed for an extended period of time and are unable to find employment, a short sale might be a good option. If you just lost your job yesterday, give yourself some time. Short sales in Miami are the last step to avoid foreclosure.
- You owe more on your house than it is worth. While simply being upside down on your mortgage is not enough to warrant a short sale, if you are struggling to make payments it might be an option. Your lender has to agree to a short sale which means you have to prove you cannot afford to pay.
- You want to protect your credit score as much as possible. A short sale is less damaging to your credit score than a bankruptcy or foreclosure, but will still have an impact. You will be able to start over with minimal credit damage with short sales in Miami.
What are the benefits of a Short Sale?
Short sales in Miami occur when your bank agrees to let you sell your home for less than you still owe on your mortgage. They will generally do this to avoid foreclosures in Miami, which cost them time and money. Once they take your home, they are then responsible for paying any taxes and then trying to sell the home to recoup their money. If you are cannot afford your monthly payments and are already several months behind, contact Miami foreclosure attorneys to see if short sale might be an option for you. Of course, your bank would prefer if you could just afford to make the monthly payments, but a short sale is a much better option for all parties involved than foreclosure.
As the seller, there are several benefits to a short sale in Miami. First, you get out of paying a mortgage you cannot afford. While you do lose your home, if you cannot afford your payments it might be your best option. You will also protect your credit score from showing a bankruptcy. If the bank agrees to forgive the rest of the loan, your credit score will suffer a bit, but a short sale is not nearly as bad foreclosure. A short sale allows you to get out from under the stress and financial burden you cannot afford while minimizing the damage to your credit score.
The largest advantage in purchasing a short sale in Miami is the low price. While there is extra paper work and waiting involved in buying a house short sale, the low price of the property is usually worth it. Just make sure that you are aware of what purchasing a short sale house will involve. The lender must approve of the agreement, which takes time. Once the deal has been approved, the process might move a little quicker than a normal transaction. Also, be prepared if you have purchased a fixer upper. You may need to put a little work into the home before moving in.
Banks want to make money. When they foreclose on a property, it means spending money and resources. It also leaves them with the responsibility of finding a buyer and getting rid of the property in order to get some of their money back. They usually take a huge loss just to off load the property. Short sales are a way for them to minimize their loss. The bank is able to avoid foreclosing on a property and get back at least a portion of what they lent out. Lenders will only agree to a short sale if they think it is in their best interests.
Short sales are all about the bottom line. The buyer gets a great deal, the seller gets out, and the bank is able to minimize their loss. If staying in your home is not an option, contact an attorney to see if a short sale can help you avoid foreclosure.
How do I achieve a Short Sale?
Short sale is a last effort to avoid foreclosure. You will still lose your home, but will avoid the cost, hassle and credit damage associated with foreclosure. In order to short sale your home, you must contact your bank and prove you are unable to pay your mortgage. If your bank agrees, you will sell the house for less than you owe and the bank will agree to discharge the remaining balance. Your lender may require you to pay part or all of the remaining balance depending upon your financial situation. Short sales Miami may be a good option for you if you are several months behind on your mortgage payments and worried you may be forced into foreclosure in Miami. Contact Miami foreclosure attorneys to find out if short sale is a good option for you. Here are the steps you can expect.
- Put your property on the market for short sale. It is very important that your realtor is experienced with short sale and the buyer is aware of how short sales in Miami work. Once you have a potential buyer, it is time to approach you bank and see if they will agree to it.
- Contact your lender and apply for short sale. Every bank handles short sales differently, but there is basic paperwork all banks will require. You will need to provide bank statements for the last 60 days, two years worth of tax documents and any other accounts you have including retirement or investment documents. You will also send a letter of hardship detailing why you are unable to make your payments and what you have done to try to fix the situation. For example, are you drowning under medical bills, did you lose your job or were you recently divorced? After you send the paper work in, you bank will consider you request. Be prepared to wait while the bank evaluates your offer. This period could take a several weeks, and it is important that your buyer is prepared to wait.
- The next step is the final review. This period will include a flurry of requests from the bank. Be ready to provide any additional paper work your bank requests including updated financial information and paperwork verifying the buyers financing. This is a good step which means the bank is seriously considering your offer. Keep on top of things and make sure you submit paperwork as soon as possible. You should also check with your buyer to ensure their financing is in order. You will also find out if your bank will be willing to wipe the slate clean and release you from your obligation to the remaining balance.
- If your bank agrees to the short sale, you will move to closing. You will have 30 days to finalize the details and sign the paper work. Once all the money and papers have been finalized you will sign over the house and be mortgage free.
What are some tips for a Short Sale?
Short sale may be an option if you are several months behind on mortgage payments and worried that you may soon be in foreclosure in Miami. A short sale is when your lender agrees to you selling your home for less that you still owe on it which allows you and the bank to avoid the money and stress of a foreclosure. Generally the bank will also agree to forgive the rest of the mortgage. Only Miami foreclosure attorneys can advise you if a short sale is the best option for your situation. If you are considering asking for a short sale Miami, it is important to educate yourself. Here are a few tips to a smooth short sale.
- Get organized. Make sure you have all of your financial documents handy. Your bank will need taxes for the last few years and pay check stubs. Create a file with all your financial documents including bank statements, and retirement or investment accounts. When you are in the review period, the bank may ask for additional documentation. The process will go much smoother if you are organized.
- Make your case to your lender. Your bank must agree to the short sale. You need convince them that you are in true financial distress. Remember you are asking them for a favor and they are under no obligation to accept your offer.
- Make sure that you hire a realtor who is experienced with short sales Miami. Short sales require different paperwork and an experienced realtor will make sure that all the paperwork is correct.
- Understand how your taxes might be affected. If you lender does agree to discharge the remainder of your mortgage after the sale of the house, the IRS may consider that taxable income. Consult a tax attorney or CPA to determine how the short sale might effect your taxes. You many end up owing some money.
- Make sure the buyer you find understands how a short sale works. While you are waiting for your lender to make their decision there will be weeks or even months where you hear nothing. If the buyer changes their mind and backs out you could be forced into foreclosure.
- Do not wait too late to ask your lender. You will need to be several payments behind, but still several months before foreclosure. Ask too soon and you will be denied, ask too late and you will not have time to close before foreclosure.
- The lender does not have to discharge your debt after the short sale. Depending on your financial situation, they may still come after you for the remaining balance unless you have it in writing that the rest of the mortgage was discharged. Additionally, they may ask you to share the loss with them and pay just a portion. Make sure you understand your bank’s offer when you apply for short sale.
Save Your Credit Score with a Short Sale in Miami
A short sale occurs when you as a homeowner are having trouble making your mortgage payments on time. Instead of allowing the mortgage company to foreclose on your home, you instead apply for permission to sell your home for less than it is worth. In most cases, the bank will then discharge the remaining amount. This allows both you and the bank to avoid a costly foreclosure. If you can no longer make your mortgage payments, contact a Miami short sale attorney to see if short selling your home can help you avoid foreclosure.
A short sale is usually a great choice for everyone involved with the property. For the homeowner, it allows them to escape a mortgage they can no longer afford to pay without having a foreclosure on their credit. A foreclosure is devastating to your credit score, so avoiding that with a short sale is worth it. With high foreclosure rates throughout the country, banks do not want to foreclose if they can avoid it, either. Filing for foreclosure costs the banks a good deal of money, and also reflects badly upon them. Foreclosure means that they take ownership of the home and are required to make tax payments on the property. The bank then has to sell the house to try to recoup their money. With housing prices still very low, selling the home rarely yields enough money to cover the remaining mortgage and the cost of foreclosure. With a short sale, the bank usually gets far more money back and is able to avoid the cost and hassle of filing for foreclosure. The buyer also comes out on top. They purchase the property at a low price, usually far below market value. Since the owner voluntarily sells the home, they do not have to worry about evicting previous owners or replacing appliances that are often stripped from foreclosed homes. A short sale is usually in the best interests of all parties involved.
Short selling your home can also help you protect your credit score, which is very important in today’s economy. A poor credit score can affect your ability to borrow money for any reason and means you will pay higher interest rates when you do borrow. A low credit score may also reflect poorly on you when you are applying for a new job, particularly if you will be dealing with money or have access to sensitive information. However a short sale will not save your credit score. Selling you home in this fashion does mean the lender is forgiving some of your debt. You could be liable for taxes on that amount, and your credit score will still suffer. A short sale is not nearly as bad as a foreclosure on your credit score. Contact a Miami short sale attorney if you thing that selling your home through short sale is in your best interests.