As an alternative to foreclosure, short sales are an agreement between the property owner and lender to sell the property for less than what is owed on the mortgage. Short sales occur when the lender decides that it is in the best interest of all parties involved to absorb a minimal loss rather than letting the loan go into default because the borrower is not able to continue making payments.
For example, a property owner who has an existing mortgage valued at $200,000 is facing foreclosure. A buyer makes an offer of $150,000, which is accepted by the mortgage company, allowing the owners to avoid foreclosure and the bank to avoid litigation, excess inventory and the very real possibility that they could lose much more if the house went to auction.
Benefits of a short sale include:
1) Avoiding foreclosure, which may prevent damage to a property owner’s credit report. Lenders do not have to pay for the substantial processing fees involved with foreclosure.
2) In accordance with Fannie Mae guidelines, homeowners who elect to have a short sale are eligible to purchase another home in two years instead of five or seven years.
3) Property owners do not have the stigma of a foreclosure on their financial record.
A short sale can be a long and stressful process. An experienced real estate attorney with knowledge of Florida’s short sale laws can help you through the process. For example, in the state of Florida, property owners who engage in a short sale may have to deal with a lending institution that demands something be done about the “deficiency balance”, or the balance owed on the mortgage following a short sale. While most will sign a “waiver of deficiency”, some lenders and servicers may try to pursue collection or ask that the property owner remits on the balance by carrying an “unsecured note”. Negotiation of a waiver of deficiency is a complicated and exasperating process further made problematic by the aggressiveness of the lender’s attorneys. If you are involved in a short sale, we strongly urge you to contact an experienced attorney that can represent your best interests and confront these high-powered attorneys with a keen knowledge and expertise concerning real estate law, foreclosure law and short sale litigation.