In this article, you will learn:
- The risks involved in a short sale
- The agreements you must make when entering into a short sale
- How multiple mortgages will affect a short sale
Typically, a short sale is something that you want to do sooner rather than later. There are a number of reasons why this is the case. Some loans will only be eligible for a short sale for a certain period of time following the initial payment default. Along those lines, banks have more of an incentive to complete a short sale early on in the foreclosure process. Most importantly, it is best to start earlier in the process because you have a larger margin of error when you start early than when you attempt to complete a short sale just weeks before a foreclosure sale date.
With that being said, the process can take anywhere from a couple of weeks to well over a year. This depends on a number of factors ranging from the type of mortgage that you have to whether or not the person assigned by the bank to process the file is smart and diligent or dumb and lazy. Typically, you’re probably looking at three to six months from when you get an offer to when you will get an approval and close.
We understand that in some instances a homeowner will need more than three to six months to make plans to relocate and get a fresh start in their life. If a homeowner starts early in the process it is much easier to get a short sale completed on a realistic timeline that allows you to be comfortably. f you get started within a couple of months of falling behind on the mortgage and you don’t want anything to do with the house, this is the way we can get a couple of months to get situated before you move before starting fresh. This happens fairly regularly when people have kids in school and would like to make it to the end of the school year but fall in foreclosure at the start of the school year. Provided that you plan in advance and obtain competent representation early in the process there is a very strong chance that you can obtain the results that you are seeking.
Why A Short Sale May Not Always Work
Unfortunately, a short sale may not always work. There are times where a short sale does not work for any number of reasons, but if you plan appropriately the odds of finding oneself ineligible for a short sale will be drastically reduced. Certain investors will not entertain short sales under any circumstances. This is very rare, but it does happen from time to time. That being said, in these cases investors are often open to alternate arrangements that will allow you to avoid liability.
From time to time a lender will say that a particular loan is not eligible for a short sale even though the loan is, in fact, eligible for a short sale. In cases like this, having an experienced attorney representing you can make all the difference in the world. An experienced and competent attorney will be able to force the bank to review the file for a short sale if the bank erroneously determines that the file is ineligible and, at the end of the day, this can be the difference between walking away scot free and being forced to file bankruptcy.
As a point in case, just a few months ago had a case where the servicer said, on several occasions and in no uncertain terms, that the file would not be reviewed for a short sale. After we escalated various processing issues to the government the lender put the file into short sale review and provided my client with a check for $10,000. This was a file where the client came to us just weeks before the property was going to be sold.
We also have homeowners ask for second opinions after being told that there is nothing that they can do to obtain a favorable disposition their case or after being told that they can’t get a short sale. More times than not the homeowner has gotten bad advice and more times than not we are able to obtain a successful result for our client.
Your Ability To Do A Short Sale With More Than One Mortgage On The House
If you have two mortgages, both lenders must approve the short sale contract. While this appears to be something that might be insurmountable, it is not. Given that second and third position mortgages often have no equity they will almost always settle for a set amount of money. Effectively, it becomes a gentleman’s agreement between the banks because the first mortgage knows that even if their mortgage is under water, they still know that the second and the third position mortgage need to get paid something or the deal will never close. Conversely, the second and third position mortgage know that if the property goes to foreclosure sale that they will recover nothing. Because of this, you can definitely do short sales with multiple mortgages.
Why It Is Unlikely To Keep Your House Through A Short Sale
In terms of keeping a house through a short sale, the odds are very low. So, with a short sale, typically, in 98% or 99% of deals, you have to sign an affidavit that says you are not selling the property to a family member or related entity, and there are no agreements for the person buying the property to sell the property back to you. This is called an arms’ length affidavit. But, with that being said, in some instances, there aren’t arm’s length requirements and the bank only cares about getting a set amount of money. So, if this is something you’re interested in, it’s always worth exploring this option or a short payoff request. But realistically, that’s not something that’s going to be available very often.
A lot of times people will inherit properties from family members who have reverse mortgages. If you are inheriting the property from someone and there is a reverse mortgage you will probably have a right to pay off the mortgage for a fraction of the amount due and keep the property. For instance, if there is a $750,000 balance due on a reverse mortgage and the house has a fair market value of $200,000, you will likely be able to pay off the mortgage for under $200,000 and keep the property.
For more information on Optimal Time For A Short Sale In Illinois, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (312) 313-1033 today.