Reasons For Legal Counsel When Considering An Arizona Short Sale
A short sale can be legally complicated and require legal advocacy for the homeowner.
A short sale is the lender-approved sale of a residence for less money than the owner owes on the home mortgage. It can be a way for the homeowner to resolve a difficult financial situation. The home’s value may have dropped because of economic or local factors, or payments may have become unmanageable due to job loss, catastrophic medical bills, spousal death or divorce.
Any homeowner considering a short sale should retain an attorney with specific experience in the transaction because it is legally complex and a lawyer can protect an unwary owner from unknowingly agreeing to unfavorable terms.
Legal counsel can explore the various options with the owner so an informed decision can be made about whether a short sale is a smart decision. If it is, the lawyer can communicate and negotiate with the lender and any potential buyer on the homeowner’s behalf, as well as draft or review related legal documents. In addition, complicated legalities can come up in a short sale and an attorney will monitor the transaction as an advocate for his or her client, the homeowner.
The bank or other lender must approve the short sale because the bank will get less than the homeowner owes on the mortgage, but it may still be worthwhile for the bank to cut its losses with a short sale when the property value has dropped below the mortgage balance or the home owners are facing financial difficulty. If mortgage default becomes a real possibility, the lender could otherwise face foreclosure costs that could be more expensive than the loss it would incur in a short sale.
But the lender is looking out for its own interests, not those of the owner. Here are some of the potential issues facing an owner in a short sale for which an attorney can provide advocacy, oversight and advice:
- Tax ramifications
- Determination of actual home value
- Hidden extra costs like delinquent taxes, liens, unpaid homeowners association dues, delinquent utility bills, and closing and other costs of the short-sale transaction itself
- Status of that part of the debt that is not repaid in the short sale and whether any liability remains for the homeowner
- Status of any second or additional mortgages, home equity loans, lines of credit and so on that are secured by the property
- Vulnerability of homeowner assets to liability or seizure
- Bogus claims of real estate brokers, third-party investors or debt-relief companies
- Impact of short sale on owner credit rating and ability to purchase another home or obtain a residential lease
- Terms of original mortgage contract that could affect short-sale issues
- Advisability of short sale over other remedies or events like refinance, repayment plan, forbearance, modification, renegotiation, deed-in-lieu of foreclosure, foreclosure, bankruptcy, homeowner government assistance program or others
- Homeowner responsibilities to continue to keep home in good repair
Real estate attorney James Whitehill of Whitehill Law Offices, P.C., in Tucson, Arizona, represents clients in short sales and other kinds of real estate issues and transactions.