The realtor told me the shortsale would prevent the foreclosure?
Class Action Attorney
That is by no means a true statement and by no means a guarantee that the sale will be postponed. In all honesty, it a tactic implemented by real estate agents to get the listing. Additionally, it is an extremely lengthy (1 year) term for the agent, which is typically only 3-6 months. Given the representations made to you that the sale would be postponed, you will be able to attack the agreement on the basis of fraud and presumably get out of it. The best practice is to work with an attorney and agent if you intend to short if you have a relieved a notice of default or notice of sale due to the impending foreclosure. I have provided you this general advice on the basis of what you have stated, but I suggest that you speak with an attorney in further detail. There is additional information that is required.
A short sale will only prevent a foreclosure if it is consummated, i.e., escrow closes and the foreclosing lien holder is paid pursuant to the short sale agreement prior to the trustee's sale.
I recommend that you promptly and personally consult with local Bankruptcy counsel who will offer you invaluable advice concerning your present circumstances and options.
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Chapter 7 Bankruptcy Attorney
The contract with the real estate is for the purpose of hiring the broker to attempt to do a short sale. However, just because you retained a broker and the broker may have have diligently been working towards selling the property, doesn't mean the lender will agree to any specific terms of a proposed sale once an offer is made by a potential buyer.
While it is true that a short sale, if approved and successful, would stop a foreclosure, and this may very well be in your interest (I can't tell, not enough facts here) there is no guarantee that the lender will approve any particular deal brought to their table.
Yes a bankruptcy attorney consultation might be helpful, just be sure you understand what your goals are and what the BK can and cannot do for you before you decide if it's a proper action to take. If, just for example, we're talking about your primary residence and the value of the home is less than the first mortgage balance, it is possible to strip (get rid of) second mortgage from the house (assuming you have one). Maybe, this makes the home more affordable to you and a more attractive investment? You can obtain a free consultation by contacting any bankrutpcy attorney either listed on avvo, through a referral from a friend/family, or through San Diego Bar Association, or www.nacba.org. It would be wise to get the BK attorney's perspective on things.
The other possible option, I don't know if there is time for this, is to hire a different real estate agent, if the person who you hired wasn't very good. But, it's hard to say from the little facts here. Plenty of brokers are doing a lot of work and getting potential buyers to come in with offers and find out that the lender won't budge. Since there is no way to compel the lender to accept any particular offer, it's a lot of effort on the broker's part and they're stuck with what the lenders will accept.
Good luck. Hope this helps.