Foreclosure Options Short Sale and Bankruptcy
Part 4 of of the Facing Foreclosure Series.
What is a short sale and can it resolve a mortgage crisis?
A short sale is a sale of real estate, your home for instance, for an amount less than what you owe on it. In a typical short sale, you and the lender (bank or mortgage company) have agreed in advance to allow the house to be sold at a certain price which is less than the balance of the mortgage. So why would a lender agree to such a proposition? In a foreclosure the lender incurs fees like attorney fees, publication fees, real estate or auction fees. If the property doesn’t sell then the lender has vacant property to maintain until it is sold sometime in the future.
In a short sale you, not the bank, would be responsible for finding a buyer. You would also be responsible for any real estate agent fees or other fees associated with the selling of the home. The benefit to you in a short sale arrangement is that you can usually remain in the home until it is sold, and have adequate time to move. Typically (but not always) you also avoid payment of any deficiency amount. (Deficiency: bank’s selling price minus mortgage balance) .
Remember, however, that the lender stands to lose money in a short sale. You also would lose any equity or potential equity you may have in the property. So before you decide that this is the solution you’ve been waiting for, investigate other possible solutions. Explore this and other other foreclosure options by consulting with an experienced lawyer, and perhaps retain an attorney to negotiate with lender to attempt a short sale agreement. Contact Purple Law Firm
Are there any similar foreclosure options in bankruptcy?
In a Chapter 13 bankruptcy it may be possible to sell the house as a part of your Chapter 13 Plan. Remember of course that a Chapter 13 Plan must be approved by the Chapter 13 Trustee and the Court, speak to your bankruptcy lawyer about the Chapter 13 plan.
Review: Chapter 13 bankruptcy
You may be able to surrender the house in Chapter 13 and have any deficiency amounts discharged under the Chapter 13 “super discharge” provision. Ask your bankruptcy attorney if you qualify for a super discharge in chapter 13. Chapter 7 bankruptcy, if you qualify, would allow you to surrender the house and discharge any deficiency as well as discharge all of your unsecured debts.
Review: Chapter 7 Bankruptcy