What Should I Know About Short Sales in Connecticut?
Over the last few years, the American economy has largely improved, but for many families, times are still quite tough. When an individual or family is experiencing financial hardship, they may reach a point where they must start selling or liquidating some of their assets—possibly including their homes. In some cases, a homeowner may need to sell his or her home for less than the amount that remains to be paid on his or her mortgage. Such a transaction is called a short sale, and it may be one way for a homeowner who is behind on mortgage payments to avoid foreclosure.
The Basic Requirements of A Short Sale
Selling a home in a short sale is a complicated process for a number of reasons. First, there are always challenges associated with selling a house. Next, because the sale price of the home will be less than what is owed on the mortgage, the amount left on the loan after the proceeds of the sale are applied—known as a “deficiency”—must be accounted for during negotiations. Lastly, a short sale is only a good option if all interested parties are on the same page and agree to the deal. In many cases, the most challenging element of the transaction is getting the lender to allow a short sale.
If you are trying to convince a lender to agree to a short sale, you will generally need to meet a few requirements:
You will need to present a hardship letter that explains why you got behind or defaulted on your mortgage.
You must show that your home’s market value is less than the remaining balance on your mortgage plus the costs associated with closing the short sale.
You must have a buyer—to whom you are not related—willing to buy the property. A short sale to a family member will not be approved.
You must provide credible evidence that a short sale is the best alternative and is in the lender’s best interest.
A lender is not obligated to approve your request for a short sale. If you have found a buyer, however, and the sale price is reasonable enough, the lender may determine that the short sale is a better option than pursuing foreclosure would be.
After a Short Sale
Assuming that the short sale is approved by the lender, there is still the issue with the remaining balance on your mortgage. Under Connecticut law, this amount can be taken care of in one of several ways. The lender could agree to waive the deficiency amount—any waiver of debt must be reported on your taxes—or the lender could ask the court to enter a deficiency judgment. A deficiency judgment permits the lender to come after you for the remaining balance by any means that are not prohibited by law. These means could include liens on other property that you own and garnishment of your wages.
It is not only possible but also extremely important for you to address any potential deficiency in your hardship letter and request for a short sale. Your lender could agree to waive the deficiency early in the process and eliminate the possibility of unpleasant surprises after the sale is completed.
Speak with A Stamford Real Estate Attorney
At the Law Offices of Peter V. Lathouris, LLC, we believe that a strong attorney-client relationship is the key to successfully resolving legal matters, regardless of what challenges may arise. If you are behind on your mortgage and you are considering a short sale, one of our experienced Fairfield County short sale lawyers can help you explore all of your available options. Call to schedule a confidential consultation with a member of our team.
Sources: