Hafemeyer Law

Short Sales

The mortgage crisis and the recent economic downturn have had an effect on home values across the state. Many homeowners have found that even as taxes and mortgage payments went up over the last couple of years, their property values decreased. It’s not uncommon for homes to worth less than the mortgage balance.

When a homeowner owes more on their mortgage than their home is worth, economists call it being “underwater.” Some homeowners have been able to continue to make their mortgage payments through the economic downturn in hopes of riding it out and regaining some or all of the value that was lost in their biggest investment, their home. For many others who were faced with job loss or ever increasing mortgage payments, staying in their home became impossible.

Faced with foreclosure, some homeowners have contemplated selling their homes for less money than is owed on their mortgage through a process referred to as “short sale.”  Selling a home for less than the mortgage thereon is certainly one way to avoid foreclosure. However, to do this, a homeowner must gain the approval of their lender. Obtaining lender approval can be difficult, and often times may take a significant amount of time.

In the event that lender approval is obtained, there is information that a homeowner should know.  A short sale is a negative entry on your credit report, the same as a foreclosure.  It makes little sense to agree to a short sale if the lender does not agree, in return, to release you from any liability for the mortgage.

It is important to get any agreement with a mortgage holder in writing.  In most circumstances, the original mortgage cannot be modified by a verbal agreement.

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