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Foreclosure - Think First of Short Sales - What's the Scoop?

Written by: Michele Ann Peters

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Posted about 3 years ago. 1 helpful vote, 0 comments

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Brief History

In the past, a “short sale” was a term associated in most people’s minds with shares of stock -- as the sale of a security by an investor who did not actually own the stock. However, in the last few years, a “short sale” has evolved into another meaning associated with real property sales. The term has captured the attention of many Americans as they worry about escalating housing costs and lowering property values. It’s also raised the interest and imagination of others as a way to profit from these misfortunes. From a legal perspective, “short sales” do not exist. They only exist if a lender permits them to exist.

Definition

A “short sale” occurs when a property is sold and the lender agrees to accept a lesser amount on the mortgage (a discounted payoff), meaning the lender will release its mortgage lien on receipt of less money than is actually owed.

Mortgage Fraud

Capitalizing on vulnerable financially and emotionally stressed homeowners, mortgage fraud schemes have reached epidemic levels. The schemes have included securing new mortgage loans using land flipping; identity theft; false appraisals; investor “family trusts” for the benefit of the fee owner; “save your credit / quick fix”; and any number of scams to effectuate the fraud. Television infomercials, internet websites, newspaper ads, are soliciting consumers to participate in these programs. The “programs” are illegal scams created to “discharge” existing mortgages of record so that replacement mortgages can be obtained on the “lien free” property. Beware of anyone recommending such a scheme. Legitimately an attorney can assist a homeowner to perhaps convince a lender to allow a short sale.

Three Most Important Considerations

If you are considering a short sale, three things are important to evaluate: • Market conditions; • How great the shortfall on the loan is; • And whether the lender is an independent bank, a commercial bank, or a government lender - each have different standards.

What Do They Want?

The lender will of course want the most amount of money to satisfy the loan. The lender will most likely demand an appraisal of the property to help determine the property’s current market value and the legitimacy of the buyer’s agreed-to purchase price.

Can I Do This Myself?

Forgive the image - but the streets are littered with the remains of persons who have attempted to do this themselves. There are many horror stories from real estate brokers of months of dragged-on discussions, lack of returned phone calls, and ultimately no deal. Usually much of the delay came about because of misinformation to begin with; the wrong persons contacted; and general lack of organization. Bottom Line -- a knowledgeable attorney can be your best friend.

Where To Go?

One option -- In Northern New Jersey or New York -- The Law Office of Michele A. Peters is prepared to evaluate the needs of the client and prepare the way to assist in effectuating a “closed” short sale. I wish you the very best of luck and success.