Short Sales
Gerald R. Della Torre, Counselor at Law
Short Sales – Questions and Answers
When a homeowner falls behind in payment of the mortgage(s) on the property, there are options available which can allow the homeowner to avoid foreclosure and the potential disastrous financial effects of same. Such options include a short sale or modification of the mortgage with the lender. In either situation, the lender agrees to either alter the existing loan to permit the homeowner/borrower pay a lesser amount than originally agreed to under the mortgage documents, or will accept a lesser amount than owed by the homeowner under the mortgage if the homeowner wants to sell the house but cannot obtain a price equal to the amount owed on the mortgage. The attorney can assist the homeowner negotiations with the lender for an approval of either the lesser payment amounts in the instance of a modification, or the lesser payoff amount in the instance of a short sale. Similar to a normal sale situation, in the instance of a short sale, the attorney handles the preparation of the closing documents, discharge of any liens on the premises, premises being sold.
Will I owe any money to the lender if I sell under a short sale?
Frequently, a lender will agree to extinguish any liability of the homeowner upon completion of the short sale. However, a lender is not required to extinguish all liability and the Firm will ensure that the best terms are negotiated with the lender towards release of liability to the greatest extent possible.
What if I have two loans on the property, and also have to extinguish a home equity line?
Frequently, a short sale situation involves two mortgages which must be discharged. The Firm will undertake to arrange for full release of all liens on the premises and frequently can negotiate to have the secondary lender accept a very small percentage of the total amount actually owed by the homeowner.
When the short sale is completed, will I have any remaining liability?
Optimally, upon completion of the short sale closing, the homeowner will have no further liability for the mortgage on the home. However, in certain circumstances, the Internal Revenue Service may impute tax liability for the difference in the amount paid off to the respective lender(s) and the amount which was actually due thereunder. In turn, it is recommended that the homeowner consult an accountant for further detailed information on the homeowner’s potential tax liability.