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What is a short sale?

•  A short sale is a sales transaction for which a seller's mortgage lender voluntarily agrees to accept a loan payoff of less money than what is owed on the mortgage loan.  In a short sale, the property may or may not be in foreclosure.  However, homeowners may consider short sales as a viable option for avoiding foreclosure.

• As an example, say the current market value of your house is $ 350,000.  However, say you owe over $ 400,000.  In other words, your property is "under water".  We will work diligently to get your bank to accept the $ 350,000 offer as full and final payment on all your mortgage debt and forgive the deficiency.  Once we are done, your house will be sold and your debt settled.

Who can help me with a short sale in North Carolina?

• There are many realtors or so called "short sale processors" who claim to understand the process.    It is rather prudent to let an experienced and licensed NC attorney handle your short sale transaction.  Do not let a so called "short sale processor" or a real estate agent who is not familiar with the relevant law to exacerbate your situation.  There are many issues with real estate agents undertaking short sales.  Some may argue that such actions by realtors are equivalent to unauthorized practice of law.

How do I know if I am qualified for a short sale?

The main qualification for a short sale is that you are in some type of  "financial hardship." 
This can include:

• loss of employment or income,
• divorce or separation,
• relocation or job transfer,
• major illness and medical expenses,
• high dollar repairs without the resources to make them,
• increased bills or higher living expenses. 

A good rule of thumb is that a short sale is not for those who simply "want" to sell, but only for those who "have" to sell.  You typically must prove your inability to pay your mortgage each month, however many lenders have become more lenient and will make exceptions sometimes for homeowners who are not even in hardship.

Who will pay the Realtor commission?

•  Your lender pays the commission.  They pay a regular real estate brokerage fee, just like a home seller would in a traditional transaction, and just like they would if they foreclosed on your home.  You pay $0 out of pocket, period.

What is the impact of a short sale on my credit score? 

• Most banks will report the debt to the credit reporting agencies as "paid in full for less than the full balance".  To learn more about the potential impact of a short sale on your credit, click here.

Do I have to pay an attorney for help with my short sale?

• Not at Semirog Law.  At Semirog Law we will handle your short sale negotiation from start to finish FREE OF CHARGE.

What happens to the debt that is forgiven by my lender?

• Any balance shortfall on your mortgage will likely be written off as a loss by your lender.  Because of this, your lenders may also send you a "1099" for any amount forgiven.  Due to the Mortgage Debt Relief Act of 2007 you are NOT required to pay taxes on this money if you short sale your primary residence prior to 2012.  Consult your accountant with any other questions regarding this.

Can I receive relocation assistance?

• You may be entitled to an incentive payment up to $3,000 to assist with relocation expenses if the closing is consistent with HAFA regulations.  Please note that if the property is vacant, an incentive will not be paid.  Only one payment per household/unit is generally provided for the relocation assistance, regardless of the number of borrowers.

Can I still do a short sale if I am going through foreclosure?

• Most likely YES!  However, it depends on where you are in the foreclosure process.  If you are well before the sale hearing, the bank will likely be more than happy to work with you on a short sale.  It is to the bank's advantage as well as yours to work out a short sale.  The foreclosure process costs a lender a lot of money.  In addition, banks do not want to have too many foreclosures on their records, as it looks bad to their investors.

Can I stay in my house until the short sale is completed?

• Absolutely!  You will not have to move out until the closing on your home.  In fact, if you are facing foreclosure and we are actively working with your bank, we can typically get your lender to delay the foreclosure proceedings and make it possible for you to stay in the home for some time.

What if I consider the short sale terms offered by the bank as unfavorable to me?

• Generally this does not happen.  We have not had such a case in our practice.  However, if the terms of the short sale are not in your best interest, you are not required to sell the property and complete the short sale.  Do remember though that a short sale will have the lender forgive you the debt and is the best option to avoid foreclosure or bankruptcy and will have the least negative effect on your credit.  If you choose not to do a short sale the bank will NOT forgive you of the debt and may continue to pursue you for the outstanding loan balance.

Can a bank "go after" me for a deficiency judgment?

• Absolutely!  In North Carolina banks can pursue you for the deficiency judgment.  In other words, if you choose not to do a short sale, but rather let your home go into foreclosure and there remains a deficiency post-foreclosure, the bank can file a legal action against you personally to recovery that deficiency.

Can my current Realtor work a short sale on my home?

• We would strongly advise against.  While there are many agents that do negotiate and work with short sales, most lack the knowledge and experience necessary to properly execute one.  A short sale is NOT part of the realtor "basic training."  The results can be disastrous!  

Can I Get a Home Loan After a Short Sale?

• The dream of homeownership doesn't have to end when you sell your home through a short sale. Even if you sell your home for less than what you owe, you can still qualify for a home loan again.
  The minimum wait period and down payment requirements to get a conventional loan after a short sale are:
  • Two-year wait with a 20% down payment.
  • Four-year wait with a 10% down payment.
  • Seven-year wait with less than 10% down payment.

   

   

   

   

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Additional Resources :

Read more about the Making Home Affordable, an official program of the Department of Treasury and HUD here.

What is HAFA (Home Affordable Foreclosure Alternatives)?  Find out here.

More on $ 3,000 relocation assistance here. 

Impact of a short sale on your credit.

Index of Relevant Terms: 

• Absolute Divorce
• Adoption 
• Contributory Negligence
• Imputed Negligence
• Defamation 
• Defenses to a Negligence Lawsuit
• Driving and Texting in North Carolina
• Emotional Distress
• Pedestrians 
• Punitive Damages
• Res Ipsa Loquitur
• Short Sale
• Traumatic Brain Injury
• Truck Accidents 
• Wrongful Death
• Wrongful Discharge from Employment