When a homeowner owes more on their home than its market value and they are struggling to keep up with payments, a lender may allow a “short sale” of the home. In a short sale, the lender is willing to accept less than the full amount remaining on the mortgage. This method of getting out from under the financial weight of a home loan does have a negative effect on the home seller’s credit. It is less severe than if the lender was forced to take ownership through the process of foreclosure.
A Chicago real estate lawyer can advise sellers on all aspects of the short sale and what rights sellers have in the process. Lenders first require sellers prove financial hardship to consider a short sale. That involves properly completing the necessary paperwork. In most cases, lenders want to work with people to avoid foreclosure. The following are a few things anyone thinking of buying a home in short sale or selling their home through short sale should know.
Lender approval is required
Potential home buyers will not be in direct contact with the lender. The sale will take place much like a traditional home sale. The seller may accept an offer on the home, but it is not a valid contract until the lender has approved the offer and all terms of the deal.
Short sale notifications and riders
The sales contract must include an appropriate short sale addendum or rider. Sellers may need to include wording about it being a short sale on any signage or advertising. A Chicago real estate lawyer can advise on the legal requirements and review all necessary paperwork.
Short sales often take longer
The amount of time it takes to sell a home by short sale depends largely on the lender and the local housing market. It is usually a slower process selling short sale because of the additional procedures, paperwork, and people involved in all decisions. The lender will require some basic inspections of the property and one or more broker price opinions (BPO).
There is no guarantee of success
It is possible that the lender will not accept any of the offers made on the property. Consulting with a Chicago real estate lawyer who is experienced with short sales may improve the odds of success. Home sellers do not receive proceeds from the sale but may qualify for relocation assistance in some circumstances.
