Short Sale as an Option for Upside Down Property
A property is considered upside down if the fair market value of the property is less than what the homeowner still owes on the property. Since the housing market's recent collapse, many homeowners are in the situation where the property is upside down and they are unable to continue making full payments on the home. For many people in this situation, a short sale is an option for avoiding foreclosure.
We provide short sale legal help for homeowners in Orange, Beaumont, Corona, San Bernardino and Palm Springs, California. Our attorneys can help you understand short sales in California. Contact us for a free consultation. We can help you get the debt relief you need through a short sale.
Short Sale Basics
A short sale is a way to get debt relief from your mortgage lender. In a short sale, you sell your home for less than what you owe on the home, and, if the lender agrees, the lender will accept what the amount for which you sell your house as payment in full for the mortgage loan. One benefit is a reporting to your credit bureau that shows the mortgage debt as settled.
For example, if you owe $300,000 on your home, and the value of the property has dropped considerably, you could perhaps sell your home for $200,000. Your lender could accept that $200,000 as a settled amount on the mortgage, and you would be free from the burden of those payments.
Issues Involved With Short Sales
Although a short sale might seem like a great way to avoid foreclosure and get free from an upside down property — and in many ways, it is — there are some things to keep in mind:
- Credit score damage: A short sale will probably do some damage to your credit score, making it more difficult to get a mortgage loan for another home in the immediate future. Remember, reporting the debt as a "settled" account is better than a debt that is still owed on a foreclosure, but there is still some damage done since the loan was not paid in full per the terms of the agreement.
- Tax issues: It is important to consider all of the tax implications of a short sale before agreeing to this deal. An experienced debt-relief attorney can help you understand these tax implications.
- Deficiency balance lawsuits: Although your lender might say your mortgage is "free and clear" at the time of the short sale, many lenders have been known to come back years later and initiate a lawsuit for the deficiency balance, which is the difference between what you owed the bank on your mortgage and what the bank actually received. This is why it is best to have the services of an experienced attorney who will review the final contract to ensure you know of any potential future risks involved before you agree to their terms.
Contact San Bernardino Debt Relief Solutions Lawyers ∙ Get the Facts
When you contact our law firm, we will sit down with you at a free initial consultation, look over your financial situation and help you understand the probable outcome of a short sale for you.
