Ohio Real Estate Attorney
Short sales are legal sales of a property when a property owner sells the property for less than the amount owed on the mortgage associated with the property. The buyer of the property is not the lender and the proceeds from the purchase all go to the lender. In the case of a short sale real estate translation, the lender has to decide if they will write off and forgive the remaining balance on the previous mortgage or seek a deficiency judgment in court to get the previous owner to pay all or some lesser portion of the outstanding balance of the mortgage including interest.
When a real estate short sale is conducted, it’s common that these terms for the deficiency judgment or balance forgiveness are in the agreement with the buyer of the property from the owner in default or distress.
A homeowner wants to sell their home for $200,000 and the mortgage balance on the property is $250,000 creating a deficiency of $50,000.
The first part of listing the property includes getting permission from the mortgage lender to agree to the execution of a short sale which is commonly known as a pre-foreclosure sale. The mortgage lender will seek information from the buyer on why the short sale is required and for an FSBO seller that may mean a loss of income, or an inability to care for the property due to injury or age. While a short sale may take several months to approve with a mortgage lender, a short sale is not as detrimental to the credit of a seller as a full-on foreclosure may be.
Once the short sale is approved by the mortgage lender, the homeowner can market the property and receiver offers. In the event that the seller is unable to sell for the price differential agreed to by the mortgage lender, the lender will have final approval on acceptance of the offer and may change the short sale agreement if the deficiency increases.
In the end, a real estate short sale can enable a distressed homeowner to surrender the property to a third party and have the mortgage lender forgive the deficiency between the sale price and the market price. There are many steps in this process and many potential caveats like mortgage lenders not wanting to conduct short sales, requiring property owners to be in default or having the mortgage lender still require some partial form of payment from the deficiency between the mortgage amount and the sale price. Short sales are expensive to undertake, they require a knowledgeable real estate agent or attorney, a legal representative from the lender and may take months to even as long as a year to get to any type of agreement. FSBO may be a method to unload your short sale real estate using an attorney to avoid the real estate commissions and fees and free you from the obligations of your mortgage.
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