Our Los Angeles foreclosure defense lawyers have a number of approaches we can take to helping you stop foreclosure temporarily or avoid it altogether.
One of those methods is a short sale. But we tend to think of this as one of the last resorts because it can damage your credit and will result in you being forced to walk away from your home.
Still‚ sometimes this makes sense when we look at the bigger financial picture. But you should never let a bank or lender pressure you into it. Take your time to research your options and thoroughly explore each avenue with an experienced foreclosure attorney.
First‚ let’s begin with a brief explanation of what a short sale is. Basically‚ it’s the sale of real estate property (i.e.‚ your home) in which the proceeds are going to fall short of the total balance you owe to the bank. Often‚ banks will write off the difference‚ but not always. (In California‚ California Code of Civil Procedure 580e precludes deficiencies after a short sale is approved).
Short sales have been far more common in the wake of the housing market implosion‚ when millions of homes were “underwater‚” or suddenly worth far less than what homeowners’ owed on them. RealtyTrac real estate research firm reported that in the third quarter of 2012‚ sales of “pre-foreclosure homes” spiked by 22 percent. Of those‚ 65 percent were short sales. Short sales of homes that hadn’t yet entered the foreclosure process also jumped by more than 20 percent during that same time frame.
It’s an alternative to foreclosure that tends to be more cost effective for both the borrower and the lender. But again‚ it’s going to hurt your credit similar to the way a foreclosure would. For someone with a stellar FICO score of 780‚ you could see as much of as 160 points lopped off in the immediate aftermath. It could take roughly seven years to recover from that.
But there are benefits. The lender‚ for example‚ is going to get more for the home in a short sale than it might if the home went through the foreclosure process. For you‚ a carefully-crafted short sale agreement can allow you to walk away from your underwater home without being sued for the unpaid debt.
If our foreclosure defense attorneys do decide a short sale is the best option‚ we try to steel our clients for the fact that the process could take months. And if you are thinking about doing it on your own? Forget it. Lenders have deep pockets and will fight you on every issue‚ battle you on every technicality. You will need an experienced lawyer who is ready to fight.
Before we proceed‚ though‚ we’re going to look at whether there are options that may be more favorable to you. For example‚ you may be eligible for a government refinance program. There are a number of them‚ such as HARP‚ that might allow you to refinance your entire mortgage and substantially cut the cost of your monthly payments. This will keep you above water and in your home.
Another potential option is a loan modification. This would lower the overall amount of your loan‚ and you have a particular amount of leverage if you are deeply underwater on your property. This is the type of negotiation‚ however‚ that you should only attempt with a skilled attorney.
If you are facing a foreclosure or considering a short sale‚ call us today to see how we can help.
If you are facing foreclosure in Los Angeles‚ contact Cal West Law to schedule your free consultation. Call (818) 446-1334.
Why short sales trash your credit‚ Dec. 19‚ 2012‚ By Liz Weston‚ MSN Money