There are many questionable claims made by Short Sale advertisers, and reliance on those claims may harm you legally and financially. (see "Caution")
Is The Short Sale Option for Me?
Some important issues to consider when deciding whether to short sale your home or allow it to go into foreclosure are:
Whether or Not You Qualify for a Short Sale
Federal Tax Liabilities Resulting from a Short Sale / Foreclosure
The Impact on Your Credit Rating
The Effect on Your Life and Finances Due to Resulting Deficiency Judgments
Whether or Not Collection Efforts by Your Lender will Cease or Continue for 10+ Years; and
The Estimated Waiting Period Before Being Able to Purchase Another Home.
We feel that you should seriously consider a short sale as an option if:
Most of your debt is your mortgage debt. In other words, you do not have any other substantial credit card or other type of debt.
If you are burdened with other debt also, it may be best to consider filing for bankruptcy and
doing a short sale. (Note:
Bankruptcy does not erase the record of a foreclosure from your credit report.)
The fair market value of your home or property is substantially less than the principal balance owed on your mortgage.
Remember that according to historical data from the last 50+ years, your property will most likely not appreciate, overall, more than 3-5% per year.
Loan Modifications and Short Sales
If you are planning to do a short sale, which is often your best option, do not do a loan modification. Usually, a loan modification takes so long, that by the time you realize a loan modification will not work, there is often no time left to go through the short sale process.
Do Not Be Fooled
By Questionable Claims
Made By Advertisers!
There are many questionable claims made by Short Sale advertisers, and reliance on those claims may harm you legally and financially.
Many individuals and families are experiencing difficult times: if you are one of these individuals, the last thing you need is to hear cleverly-worded, one-liner rants crafted by high-powered marketing experts who have the insidious purpose of luring you by giving you false hopes. We have received many calls from individuals and families who have been misled and hurt by believing these claims, including:
"Short Sale Today-Buy Tomorrow"
Anyone can buy property at any time before, during, or after, a short sale-If you have the cash
. The real question is: can you borrow money from a coCAentional lender to purchase property right after you short sale your property? The general and simple answer is---NO!
Some of these advertisers claim this is possible because they "clean your credit report"
. Credit report cleaning is a long-time misunderstood process. Temporarily
removing bad credit is not difficult; but, removing data from all reports regarding your ownership of property and mortgages related to that property is not possible
except in some very unusual and very rare situations.
Many families and individuals have moved forward with purchasing a new home shortly after a short sale under the assumption this claim is true, only to find out that at the final step of qualifying for a loan (at underwriting), a "qualified credit report"
is obtained, and in every case the previous property ownership history is revealed.
Due to recent events and increased lender-scrutiny, ALL
underwriters will insist on understanding how you just recently owned a home, with a mortgage, and suddenly you have no home and no record of paying off the mortgage. In every case, a loan will be denied-no exceptions
. This often occurs after a family has spent up to $1,000, or more, for appraisals, inspections, and other costs; and, after two realtors, a title company, and an originator have spent substantial time and effort preparing for the sale. Lastly, the seller is harmed in that now they have the expense of ownership of their property until they are able to locate another buyer and go through the entire process again.
This is a travesty, and many people are hurt-do not allow this to happen to you or your family.
Regarding so-called credit report cleaning, the fact that you previously owned property and sold the property at a short sale is a material fact when it comes to borrowing money from a mortgage lender; and, intentionally failing to disclose this fact on a mortgage application could possibly be considered mortgage fraud
, which could result in criminal prosecution
"We'll Make Sure the Bank Doesn't Sue You"
Taken generally, this claim is not as deceitful as many other claims. However, this claim could leave you with the impression that because you use their services, the bank will not sue you. The fact is that no one
can force a lender to waive their legal rights under a mortgage. What an attorney can
do is use their best efforts to help insure that, if you sell your home in a short sale, you will obtain the best terms possible
with the lender and the attorney will fully advise you of the legal effect of those terms.
Short Sale Approval Letters
If you sell your home short (short sale)
, a separate legal contract must be entered into between you and your lender. This contractual agreement is commonly referred to as a "Short Sale Approval Letter"
. Mere bank approval of your short sale does nothing
to protect your interests! Only an attorney
can legally advise you of the legal affect of the terms of your "Short Sale Approval Letter". A "Short Sale Approval Letter" contains special legal terms many do not understand. "Common sense" and "real-world knowledge and experience" does little to help one understand and interpret the legal effect of these terms. Relying on a Realtor®, Title Agent, CPA, or other non-attorney
to give a legal interpretation of this contract is, on the part of a non-attorney, a violation of the law
, and is in violation of several rules of ethics and professional conduct. We receive several calls from individuals who are being sued by their lender and are in more trouble after the short sale than they were before because they relied on non-attorneys to give them legal advice.
"You Don't Need an Attorney"
If you have a serious medical issue, you visit a licensed medical doctor. If you have a serious legal problem, you obtain an attorney.
Only an attorney competent in these matters can legally advise you of the legal affect of the terms of your "Short Sale Approval Letter"
. A "Short Sale Approval Letter" contains special legal terms many do not understand. "Common sense" and "real-world knowledge and experience" does little to help one understand and interpret the legal effect of these terms. Relying on a Realtor®, Title Agent, CPA, or other non-attorney to give a legal interpretation of this contract is, on the part of a non-attorney, a violation of the law, and is in violation of several rules of ethics and professional conduct. We receive several calls from individuals who are being sued by their lender and are now in more trouble after the short sale than they were before because they relied on non-attorneys to give them legal advice.
"We Don't Charge You a Fee for a Short Sale"
Some Realtors® tout this claim as if they are doing a good thing and being fair. The fact is, they do not charge a fee because they are forbidden by law
to charge a fee. Remember, you get what you pay for, and no one works for free
. Often, if there is no fee involved, it is possible that you are probably indirectly paying someone, somehow, in a manner that is not fully being revealed to you.
"Reduce Your Principal"
In some cases, this is a crafty claim that in some instances can be technically true, but in reality is often not true. One instance of this occurs when doing a "loan modification"
. If there is a so-called reduction in principal, it usually occurs when you obtain a loan modification (actually, in most cases, this is a "loan forbearance", not a modification). If your principal is reduced on your original loan, it is often because the amount of the principal reduction, and other losses to the bank caused by the "modification", are extracted from that loan and you are required to take on an additional "balloon payment" loan that has to be paid sometime in the future. So, surprise
, you have a principal reduction on your first mortgage; but, the new mortgage more than makes up for it
Sometimes there is truly a principal reduction. In most cases here in Palm Springs, this reduction of principal is substantially less than the reduction you actually need in order to actually improve your overall financial condition.
"The Bank Can't Produce the Original Note"
"Sue the Bank" "Get your House for Free"
There are some that claim they can force the bank to give your house to you for free! This does
not happen. This is an insidious attempt to prey upon a homeowner's love of their home, and
sometimes their greed, in order to cheat them out of their savings. Some of them will charge from
$3500 to several thousand dollars to "sue the bank". An honest person would Not suggest that
you sue a bank without a clear and solid good faith legal argument upon which to base such a
suit, even then, suing a bank if often still unwise. We have met with several people who have
been bilked out of thousands of dollars by this type of scamming of them elderly, who are now
left with no savings and no home in which to live.