When a property is sold for an amount that is less than it is worth or less than the balance owed to the bank (with the approval of the lender), it is referred to as a short sale. The funds acquired during this sale are given to the mortgage holder and applied to the balance you owe. Though short sales are often associated with foreclosure, it is possible to sell your home in this manner without a foreclosure being initiated. Learning more about this type of transaction along with reasons to consider a

Divorce

A divorce is one of the most expensive financial transactions a person can expect to go through in his or her lifetime. Not only do you have to navigate the emotions associated with ending a marriage or establishing custody of children, you must also figure out a way to divide marital property. When a couple jointly owns a home and neither wants to surrender their interest to the other party, selling may become the only reasonable option. A short sale is a way to sell your property, quickly satisfying both parties and resolving one of the most complicated aspects of marital asset division.

Emergency Move

The average person in the United States can expect to move approximately 11 times throughout his or her lifetime. It is not unusual for a person of any age to need to move for an emergency reason that is not necessarily tied to finances. As the number of senior citizens throughout the country increases, many people find themselves needing to provide sudden care for aging loved ones. A prolonged visit could quickly turn into a permanent arrangement, and a short sale can benefit a person who needs to sell a home quickly so that he or she can make a relocation official.

Financial Trouble

Even though you might not be facing foreclosure, it is possible to find yourself in a difficult financial situation that your existing mortgage makes worse. Losing a job, being transferred to a less lucrative position, or another financial hardship could all make a short sale a better option for you than a traditional property sale. This is especially true if you are having problems keeping up with homeowners association fees, the property value in your area is stagnant or dropping, and you do not believe you will be able to stay current on your mortgage payments for much longer.

Talk to an Attorney

Deciding whether or not a short sale is the best option for you is something that you should do with the assistance of an experienced short sale attorney. An attorney can review all of your available options and give you realistic advice regarding whether negotiating with your bank or selling your home will provide the long-term relief you need. The attorneys at Resnick Law P.C. understand how stressful this process is and we work on your behalf to help alleviate your burden. Contact us today at (248) 642-5400 to schedule an initial consultation so that we can begin providing you with the help that you deserve.

(image courtesy of Max Sandelin)

A foreclosure may not be the end of a homeowner’s financial problems if the homeowner has multiple loans secured by the home. These additional loans are generally known as junior liens, and they can take the form of second mortgages or home improvement loans. The lenders of these loans are usually behind the original mortgage lender in terms of getting paid when the house sells. This could leave the homeowner personally liable for the junior loans.

If the original lender, the senior lien holder, sells the home in foreclosure, the income from the sale is used to first settle the senior lien holder’s loan. If there are any additional funds left over, they can be applied to any junior loans. The junior lien holders can make a claim on the surplus from the sale of the home, but have to prove the validity of their claims. If the money only partially covers the balance of the loan, the junior lien holder can sue the homeowner for the balance.

This can also be the same outcome in a short sale or deed in lieu of foreclosure. However, in these situations, there is an opportunity for the homeowner to negotiate with all the lien holders in order avoid personal responsibility for a deficiency on all loans. These negotiations should take place before the sale takes place, and all lenders should agree not to seek deficiencies from the homeowner. This may work better if all the loans were provided by the same lender.

Homeowners should note that the junior lienholder who has an interest in the property can also foreclose on the home. If a junior lien holder sells the property, the senior lien holder still has an interest in the property, even if it is transferred to a new owner. Additionally, any surplus from a foreclosure by a junior lien holder does not necessarily go to the senior lien holder, and instead goes to other junior creditors or to the homeowner.

Following foreclosure by a junior lien holder, the original lender can still pursue the balance of the mortgage from the homeowner who took out the loan. The obligation to pay on the loan is not transferred to the new homeowner. However, the new homeowner does not own the property free and clear, and the senior lien holder’s lien remains with the property until the debt is discharged by payment or through bankruptcy.

If there are other creditors seeking to get paid, the homeowner who loses a home to foreclosure and faces the prospect of a deficiency judgement should consider filing for bankruptcy. Bankruptcy would allow the homeowner to erase all the debt, including junior liens, and start fresh even though it may negatively affect the homeowner’s credit.

Contact an Experience Attorney

If you are going through foreclosure and have multiple loans against the property being foreclosed, call us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan. Our experienced foreclosure attorneys can help you navigate the process and negotiate where possible to try and help you avoid deficiency judgments.

(image courtesy of Nathan Fertig)

A short sale occurs when a mortgaged property is sold for less than the mortgage loan owed on the property. Short sales do not usually occur without the approval of the mortgage lender. Therefore, homeowners who wish to get out from under an underwater mortgage loan need to negotiate with their mortgage lenders. Underwater mortgage loans occur when the home is worth less than the amount owed on the loan.

How the negotiation and discussions with the mortgage lender are handled can make a difference in whether or not the homeowner going through a short sale gets to be completely free from the mortgage debt after the short sale is completed. In Michigan, after the short sale, the mortgage lender can seek the balance between the amount of the short sale and the amount owed on the loan. This balance is called a deficiency. The mortgage lender can sue the homeowner to get this deficiency.

In negotiating the terms of a short sale with the mortgage lender, it is important to make sure that the mortgage lender waives all deficiencies, or agrees to settle the deficiency for a reduced amount. If the mortgage lender agrees to waive the deficiency, once the short sale is completed and the money from the sale is applied to the loan, the homeowner is released from the loan obligation.

Short sales are also noted on credit reports and can affect a person’s credit history; however, short sales are reported as settled or negotiated loans, and the notation does not raise the same negative inference as a foreclosure notation. In addition, it is possible for a person who has goes through with a short sale to apply for another mortgage loan soon after the short sale. This is not possible with people who go through foreclosure, who often have to wait years before they can qualify for another mortgage loan.

If you are contemplating a short sale, it is important to keep up with the mortgage payments as much as you financially can. Missing payments can affect the way the short sale is reflected on your credit history, as well as affect the lender’s willingness to negotiate with you.

Let Us Help You

If you are a homeowner and struggling with an underwater mortgage, you may be able to avoid foreclosure by going through with a short sale. Before approaching your mortgage lender and start negotiating for approval to go through with a short sale, call us at Resnick Law, P.C., in Bloomfield Hills and Detroit, Michigan. Our experienced attorneys can help you navigate the process and ultimately reach a favorable end to your mortgage problems.

(image courtesy of Matt Jones)