My Lender Wants Me to Short Sale

If you are underwater on your mortgage your lender may approach you and inquire about a short sale.  You may be wondering what a short sale is and if you should do it? Or you may wonder if you can do a short sale after Chapter 7 bankruptcy?  First things first, you need to decide if you want to try to keep your home or if you are ready to relocate.

Let’s begin by explaining what a short sale is.  Simply it is the sale of your home when the net proceeds fall short of the amount currently owed on your mortgage, in other words you will sell your home for less than you owe.  In order to be successful two things must occur.  The lien holder (the Mortgage Company or Bank) must be agreeable to receive less than the amount owed on your mortgage and amenable to an amount lower than the appraisal value.

short sale after Chapter 7 bankruptcy

Steps To A Short Sale

  • Contact your Lender
  • Upon Lender approval, review the terms of the short sale
  • Select a real estate agent who has a strong background in handling short sales
  • Obtain and review a Broker Price Opinion Letter (essential an informal appraisal)
  • Contact your lien holder and negotiate a reduced payoff amount
  • Submit all short sale offers to your lien holder and negotiate terms for approval
  • Obtain a release from any and all deficiency liability from your lien holder

Short Sale After Chapter 7 Bankruptcy

A short sale does not typically make sense if you have filed Chapter 7 bankruptcy.  When you sale your home you work with the lender to agree to accept less than the amount owed and to forgive the additional debt.  However, when you file Chapter 7 bankruptcy, if you do not reaffirm the mortgage, your debt is automatically discharged.  In turn, the need for a short sale is non-existent.  It is important to note, when you do not reaffirm your mortgage the lender may still foreclose on your property.

Your Credit Score

Lenders will list a short sale as a settled account, and this can be less damaging to your credit score than a foreclosure.  In some instances your credit score may be affected by as little as 60 points.  The amount your credit score will drop will really depend on various factors, such as what your score was to start with and if you had been paying your mortgage payments on time.

Short sales have been on the rise since the real estate recession in 2007.  And, many people believe short sales are a valuable alternative to foreclosures.  Now that you have a brief overview of what a short sale is, what it consists of, and how it will affect you, you should be in a better position to decide if you wish to keep your home or relocate.  Should you feel relocation is for you, it is wise to contact a bankruptcy attorney for assistance in fully understanding your options, the various available remedies for your situation and the processes each involve.

About Marc Aaron Goldbach

Marc Aaron Goldbach has worked tirelessly to develop a successful bankruptcy and civil law practice for clients located throughout Los Angeles County. Mr. Goldbach at GoldBach Law Group have represented a wide array of small businesses and individuals with 100% client success rate. Mr. Goldbach is always available to answer questions and willing to guide you through the entire legal process.
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