Short Sale – Is it Right for Me?

In today’s economy “short sales” are receiving a lot of attention as a viable option for Florida homeowners wishing to avoid foreclosure. This is especially true for Orlando residents as the city was hit hard by the recent recession. If you are asking yourself whether a short sale could resolve your current financial difficulties, you should know that while a short sale may be the right answer for certain property owners, there can also be serious consequences to this course of action.

Our Orlando short sale attorneys at Tudhope Law are highly experienced in negotiating with banks and lenders and can advise Central Florida residents on the benefits and dangers of short sales. We’ll make sure you understand all of the legal options that may be available to you in lieu of foreclosure.

What is a Short Sale?

A short sale occurs when a bank or lender agrees to accept an amount less than the mortgage amount owed in order to satisfy the entire loan. To initiate a short sale, the homeowner must first contact a realtor to find a purchaser for the property at the current market price (which in today’s economy may be substantially less than what the homeowner originally paid for the property).

Once a buyer is found, a short sale attorney will draft a short sale contract and it will be submitted to the lender. While similar to a regular home sale, in a short sale, either you or your representative must negotiate with the lender how much (if anything) that you will owe the bank after closing. Under the terms of a short sale agreement, the lender may agree to one or more of the following options:

  1. A lump sum payment by the homeowner of all or part of the existing mortgage
  2. A repayment plan of all or part of the existing mortgage
  3. Forgiveness of the full amount of the outstanding debt

Once the terms of the short sale, including any payback terms, are agreed upon, they must be set forth in a formal contract. You should be aware that there may be important tax consequences of a short sale, particularly if the lender agrees to forgive all or part of the outstanding debt. If you have a second mortgage on the property and that second mortgage will not be paid in full, the second mortgage holder’s rights must also be addressed in the contract.

Benefits of a Short Sale

A short sale is beneficial to Orlando homeowners because it allows them to avoid foreclosure. It’s also beneficial to the bank because the bank is not in a position to manage and own property for extended periods of time. Lenders therefore look forward to receiving a substantial portion of the outstanding mortgage as an alternative to foreclosure costs and maintenance fees.

When faced with foreclosure one of the first steps you should take is to contact an Orlando short sale attorney. They can guide you through the short sale process and may be able to keep you in your home for up to a year. During this time you can stop making mortgage payments, save money, and ultimately stabilize your financial situation.

Short sale transactions can be complex and time consuming. While a real estate professional can assist you in the sale of your property, please remember that he or she is not a lawyer and may not be able to fully advise you on the legal and tax consequences of a short sale contract. It is therefore imperative that you speak with an experienced attorney prior to negotiating a short sale deal or signing any contract.

Call us today at (407) 969-0044 to discuss your legal rights. We can also assist realtors and mortgage brokers in guiding their clients through the short sale process – negotiating with lenders and obtaining the best possible payoffs for all parties involved.