Short Sale

With the collapse of the real estate market, the short sale environment has grown exponentially and is an advantageous tool for bankruptcy clients. Short sales move through escrow quickly, and are often preferred by lenders over foreclosure. Clearly, they are now much more advantageous to a debtor than ever.

Short selling your real estate property may be in your best interest. This could be true whether you are in pre or post petition bankruptcy. In some cases it should be considered even if you are not considering bankruptcy at all. For those who don't qualify for bankruptcy, yet need relief from their upside down mortgage, selling short may be the best alternative…much better than foreclosure.

There are 10 good reasons to consider a Short Sale:

    • More Time in Your Home: A short sale can extend the time in the house. If a foreclosure is pending, a short sale can buy several more months if the bank sees an escrow has been opened and they no longer need to foreclose and put REO property on their books.
    • Reduces Liability to The Debtor: A short sale reduces liability exposure to the debtor. As long as the property remains in the debtor's name, there also remains exposure to significant liability risks (i.e. pool, fire, dangerous conditions) until transfer of title. A short sale immediately cuts off this risk.
    • Reduces HOA Fee Liability: Debtors remain liable for Home Owner Association fees after their bankruptcy until the title transfers. A short sale immediately eliminates all HOA fee exposure.
    • RFDCPA Claims: A short sale can create Rosenthal Fair Debt Consumer Protection Act claims. This is because banks frequently will report that the house was sold without full payment on the credit report. This is false due to the bankruptcy which requires a bank to only report $0 balance and discharged in bankruptcy. Thus a client can pursue lenders for monetary damages and receive compensation as a result of any false reporting to credit bureaus.
    • Compliance with Bankruptcy Code: A short sale helps a debtor comply with their statement of intentions in the bankruptcy. If a client states they plan to surrender the property, the short sale can help the debtor comply more quickly with the bankruptcy code's requirements on debtors.
    • No Tax Liability: A short sale will not result in any tax liability since the underlying claim has previously been discharged in bankruptcy. Also, recent federal law protects homeowners from tax liability, regardless of a bankruptcy.
    • Closure: A short sale will bring closure to the debtor. No more billing statements or calls, which are allowed under the new amendments that fall under bankruptcy code, 11 USC 524j, despite the discharge. That new provision allows secured creditors of real estate to contact the debtor for payments after the bankruptcy discharge without violating the discharge order. A short sale ends this.
    • Housing Market: A short sale helps the housing market. This is because the property immediately transfers to a new buyer and is not taken back by the banks as REO property to sit on their books as vacant shadow inventory, which eventually further depresses the housing market.
    • Protects the Community: A short sale is good for the community since it avoids waste and further housing depreciation. With foreclosed property, there is frequent vandalism, disease spread by stale swimming pools, unkempt yards, etc. A short sale avoids this with the pride of ownership by the new owner.
    • Re-enter the Market Sooner: A short sale can significantly improve credit scores over time, enabling the seller to buy a home again several years sooner than a client that forecloses!

If you have not explored this option, please contact our office immediately for a free evaluation.


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