Both realtors and homeowners can lose when short sales go long

April 10, 2013

Both realtors and homeowners can lose when short sales go long

Article provided by Middagh Law Group, P.L.L.C.
Visit us at http://www.m-llaw.com/

The nation's economy is showing signs of improvement but the real estate market is bouncing back at a snail's pace. News sources are reporting 2012 year-end statistics that reveal a mix of good and bad news for homeowners.

The Office of the Comptroller of the Currency (OCC) -- which monitors foreclosure actions across the U.S. -- reports that the number of new foreclosure filings are at its lowest since the beginning of the financial crisis. However, according to RealtyTrac, more and more U.S. homeowners are seeking short sales -- selling one's home for less than the outstanding mortgage -- in an effort to prevent foreclosure actions. While short sales allow underwater homeowners to get out from under their mortgages, many are not able to consummate the deals.

Saving one's home

When homeowners are in danger of losing their homes, many work with realtors in attempts to sell their homes on their terms, before the mortgage bank forces their houses from them. People avoid foreclosure in a number of ways such as:
-Loan modification
-Refinancing
-Principle reduction
-Short sale

When the amount owed on the home is higher than the fair market value, a short sale may be desirable. With a short sale, the homeowner sells the home for less than the amount of the mortgage and the bank forgives the balance owing. However, before the deal can close, the bank must approve the sale and here is where the process can be drawn out.

The concept is simple but, unfortunately, the short sale process takes so long that some people end up losing their homes anyway. Mortgage lenders are not keen on letting go of money and are not in a hurry to give their stamps of approval to deals that will, ultimately, cause them to lose money.

First, the bank analyzes the finances of the homeowner: if they have plenty of savings, the bank will be less likely to approve the short sale. As with any large financial transaction, this analysis almost always takes longer than one believes it should.

All real estate deals require reams of paperwork and, if one page is unsigned or is missing, it may be a month before the bank notices. Some documents need constant updating, like recent paystubs, and the bank continually requires more documentation. Sometimes, by the time the bank approves a short sale, the buyer may have decided to purchase a different property.

Savings one's livelihood

Homeowners are not the only losers when a short sale fails to close. Realtors who work with homeowners and homebuyers invest their time and money into each transaction. If a sale or purchase does not close, the realtor is not paid. Realtors commonly turn to mortgage litigation lawyers to assist with their customers' real estate transactions in order to help procure a satisfactory and timely solution for all parties.

Seek legal assistance

If you are struggling with your mortgage payments and need assistance saving your home, an experienced mortgage lawyer may be able to help. By working with you and your realtor, an attorney knowledgeable about foreclosure defense and short sales can advise you of your rights and help guide you to a solution.