Last week I told you the story of a young family who recently lived through a short sale. Here are some surprising facts they learned about the process of short sales.
Any homeowner has the right to sell his property for less than owed. There is nothing illegal about that. HOWEVER, he must bring the difference to the closing table. So, if there was a difference of $5,000 and he can bring a check for $5,000 to closing, everything is fine. This is called a short sale. But this type of short sale doesn’t require any approval or participation by the homeowner’s mortgage company.
The trick is when the homeowner doesn’t have enough money to cover the difference. Then the mortgage company has to agree to allow the sale to continue even though there is a difference between what is owed and the amount of the sale price. This is the most common use of the term “Short Sale”.
Even if the lender agrees to a “Short Sale”, the homeowner may be left holding the bag! Just because the bank may agree to release the lien, so the sale can happen, that doesn’t mean they are automatically willing to write off the difference. It is imperative that the homeowner have someone to negotiate with the bank that the lien is “satisfied” at closing. Remember, this is NOT automatic!
Too many homeowners have walked away from their short sale closing with a debt of several thousand dollars owed to the bank, even though they no longer own the house. If you are a homeowner facing this situation – Be careful! Make sure you have someone in your corner helping you negotiate your short sale. Otherwise, you might end up holding a substantial debt.
In my next blog, I’ll show you other potential pitfalls – even if the difference has been forgiven.
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