A short sale refers to the sale in which a house is sold for a price that does not adequately cover the mortgage amount or any debt attached to the real estate property. The proceeds from the short sale can pay off some of the balance; however, you still owe the lender an outstanding debt. The main benefit of a short sale is that it forestalls a foreclosure and is less harmful to your credit score than a complete foreclosure.
At Mekhtiyev Law, we can help you understand the process of short sale and navigate you through its complexities.
Basics of a Short Sale in New York
In New York, a short sale offers options for homeowners who:
- Are at risk of not meeting their mortgage payments on time
- have missed one or more mortgage payments
- are in danger of going through a foreclosure
- owe more on their mortgage than the value of the home
- are not eligible for other forms of relief
In a short sale, the lender authorizes the sale of a real estate property for an amount lesser than the homeowner’s total outstanding debt. However, this sale can only be made under specific conditions:
- The buyer must be an entity other than the bank
- The lender must receive all the proceeds from the sale
- The lender will make a determination on whether to forgive any additional outstanding debt after the sale
A short sale process begins when a homeowner assesses their financial situation and opts for avoiding foreclosure. An authorized representative is consulted for a potential short sale, and if the homeowner is eligible for it, they will consult other professionals, including a real estate attorney.
If the homeowner decides to pursue the short sale, the next step is to set a sale price and to find a potential buyer. The homeowner can then submit the proposal to the lender, who will decide whether to move forward with the short sale. However, not all lenders will approve a short sale, and some may find it more beneficial to foreclose on a home rather than authoriza a short sale. In many cases, lenders will authoriza a short sale since foreclosing on a home is an expensive and complex business, and the entire process can take years.
In addition, a homeowner who is unable to pay their mortgage will not be able to contribute anything to the escrow account that pays the homeowners’ insurance and the property taxes. As such, the cost of these will be assumed by the lender to protect it’s collateral. If the lender is aiming to avoid this, they may approve a short sale.
If a lender does accept a short sale, they may release the lien against your home for less than the outstanding mortgage debt.
In many cases, the transaction will go through, and our attorneys will assist in achieving that goal.
Short Sale in Case of Multiple Lien Holders
If there are multiple loans secured by the real estate property, all of the lenders must agree on a short sale. There is not much incentive for a lender who is in the second or third lien postition to accept a short sale, but if the first lender accepts, the remaining lenders will be given a small portion of the proceeds as well, so many time those lenders do agree to the short sale as well.
Our New York real estate attorneys can help you navigate this process.
Understanding Deficiency Judgement
A deficiency is the difference between the total debt on the property and the sales price. In some cases, the lender may choose to forgive the deficiency; however, in others, the lender may choose to recover this amount from the debtor.
In this case, a lien or a legal claim to the debtor’s other assets is issued, including garnishing wages or levying your bank account to recover the deficiency in case the debtor defaults on the loan.
In New York, no law can stop a lender from getting a deficiency judgement within 90 days of consummating a short sale. If the bank does not move to file a deficiency judgment during this time, it will have to forfeit the right to cover the outstanding debt.
Typically, banks will request a deficiency judgment while they file to confirm the sale with the court.
How Real Estate Attorneys Can Help You During a Short Sale Process
If you are a homeowner who is considering a short sale, it is essential that you hire a qualified real estate lawyer who can act in your best interests and provide you with high quality legal guidance to successfully navigate the process of a short sale.
Understanding Short Sale
The short sale contract is one of the most important and complex legal documents in the short sale process. It contains all the details and nuances of the transaction as well as each party’s rights and obligations. Some of these include the listing price, deductions from the sales price, cancelation clauses, responsibility of property maintenance during the listing, sales contract submission, the release of personal liability, suspension of foreclosure, and circumstances for termination of contracts.
Since this contract is comprehensive and contains complex legal concepts, our lawyers take the necessary amount of time to dissect the contract and help you understand all aspects of the short sale.
Helping Reduce Liability
As real estate attorneys who are experienced in short sales, we understand the risks involved with every transaction. We understand that there is no surefire way to know whether a bank will be amenable to forgiving the remaining balance and may still retain the right to deduct the money from the seller’s bank account.
Typically, the lender’s right to take legal action will be detailed in legal documentation. However, this intention may not always be included in the document, but that does not mean the lender has waived their right to get due to compensation.
Whatever the case may be, a real estate lawyer will include this provision in the sale contract to try and dissuade the lender from taking this course or action.
Providing Emotional Support
Our New York lawyers offer peace of mind by showing they are proficient in all legal aspects of short sales, promoting seller confidence. In addition, they also work in the best interest of the homeowner and ensure the homeowner is protected from the lender or anyone other entity or party who may try to take advantage of the financial hardships of the homeowner.
In addition, an experienced lawyer will handle all communications pertaining to the short sales, eliminating the hassle and anxiety that stems from demands for payments, harassment from creditors, and other stressors.
Deciding on a short sale is a serious matter. If you find yourself in this situation, it is important that you hire a real estate lawyer who is familiar with the process and can make sure that you have all the necessary support and tools available to make a fully informed decision.
At Mekhtiyev Law, we can help you with that. Contact us for a free consultation today by calling (212)203-6974.
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