The Illinois Law Group

When property owners know that they are skirting the boundaries of foreclosure but have nowhere to turn after expending all other options, such as loan modifications and working with the bank to make the debt affordable, finding short sale help can be a valuable last option that has the potential to save you immense harm to your credit score while still eliminating your mortgage debt. When a homeowner is forced to sell their property for less than the mortgage is worth it is called a short sale, a special arrangement worked out between a lender and borrower to eliminate debt obligations in the most advantageous manner possible for both parties. Believe it or not banks do not actually want to possess too many properties, it is more valuable to them to hold 100 mortgages than 100 empty lots for sale. Thus it is often better for the bank to write off a small loss on a mortgage in favor of quickly selling the property to an individual capable of making mortgage payments. This is the basis of the short sale relationship between bankers and borrowers.

However most banks have very little interest in writing off any debts if they feel that they can continue to get payments out of an individual. Short sales are considered a last resort because it is better for both the bank and the individual to refinance or work out an arrangement first, but when those fail short selling remains a viable option to handle out of control debt. Once the debt reaches such untenable levels it is usually a wise idea to consult a Chicago bankruptcy attorney or other local expert to learn about what options are available before making a decision. This is important to avoid wasting time on a process that will bear no fruit, or at the very least to have everything prepared before bringing suit to the bank to ask for a short sale.

One thing you will discover about how to short sale is that it is always a wise idea to go to the bank with paperwork proving financial hardship and inability to pay, as well as documents appraising the current value of the home. For example you will need to bring copies of proof of income and any assets you possess, bank statements, and an estimated closing statement that details the expected price of the property compared to its financial obligations. Dealing in hard numbers is a good way to definitively prove your financial hardship and is likely to give your case a huge boost when being determined by the bank.

There are 8 million homes in America that are currently worth less than the mortgages are, meaning that their owners are forced to either pay the bank after they sell the home or find some short sale help to offer a beneficial alternative that doesn’t come with ten years of bad credit. Unfortunately millions upon millions of people took out loans they could not afford or exotic adjustable rate mortgages during the housing boom of the mid-2000s that have risen to impossible heights as a result of the poor economy. As a result every day our newspapers are clogged with stories of homeowners ending out on the streets after the bank arrived to claim their due, and countless others are doing everything they can to avoid a similar fate.

If you are buried under a mountain of debt that you simply cannot pay it may be time to consult the advice of a Chicago bankruptcy attorney to learn about the myriad of ways you can renegotiate or settle your obligations as painlessly as possible. However this can be a lengthy process, and if you are already staring the specter of foreclosure in the face then it is time to take decisive action and being teaching yourself how to short sale now, before foreclosure becomes a reality. Believe it or not, short selling is even more useful to those who are making payments and have good credit than those who already possess damaged credit scores due to the bad economy. This is because homeowners making payment still have a salvageable credit score, making the payoff for all of the hassle of the short sale process much more worthwhile.

Let’s face it, convincing your lender to agree to a short sale on your defaulted property is no easy feat. The process was fairly uncommon until the housing market imploded, but fortunately now many banks are realizing that it is simply cheaper and more humane to negotiate a short sale with their borrowers than to change the locks and throw the tenants out on the street. With the right advice and a bit of luck you can capitalize on this trend, but you will need to be persistent and do your homework before initiating the discussion. Be sure to have plenty of documentation proving your financial hardship and explaining, in bold numbers, exactly why it would be better for the bank to work with you than to foreclose. With some coaching by your legal counsel and a little preparation you can preserve your credit score and eliminate another toxic debt on the list. So what are you waiting for?

And don’t forget to speed up your slow Macbook for maximum performance.

So you have decided to avoid foreclosure by short selling your property before financial disaster can strike. Fantastic! Now, do you know what you are doing? If not, then you really need to look into short sale help before you step into a mess that can’t be cleaned up before foreclosure arrives. The short sale business is particularly tricky, filled with gray areas and blurred lines that make it easy for a homeowner to miss their last shot at saving their credit from the woes of foreclosure. This is not always intentional, the short sale process simply was not used very often until the housing crisis struck, and many banks do not have the streamlined internal systems to administer the volume of requests that they are receiving.

If you were planning to liquidate all of your assets and file for bankruptcy in Cook County you would hire a Chicago bankruptcy attorney, correct? You would want to hold onto as much money as possible to support you after the proceedings concluded–it’s only natural. So why not do the same when it comes to your mortgage? Even though short sales seem simple enough the process is actually quite complex and leads to many deals falling out right before foreclosure sets in. In fact, one of the biggest pitfalls in organizing a short sale is simply making sure it happens fast enough to avoid that exact scenario–far too many sales disintegrate right before the finish line as it is.

Another major problem to be dealt with is having a second mortgage or another lender claiming the house as collateral, since the second (or “junior”) debt holder tends to take the brunt of the damages on the banking side. This is far from a motivation to be accepting of the deal, and as such junior lenders often tend to kill short sale deals early in the negotiations. This is where it gets real handy having someone who knows how to short sale around to navigate such pitfalls and negotiate a good deal. In fact, without such an experienced person the homeowner negotiating for a short sale could very easily end up with a deal that sells the property, but wherein they still have to pay the remaining (deficient) balance in addition to taking a credit hit, leaving you in a foreclosure-like situation anyway.

If you have the opportunity to seek professional assistance to help you close the deal on a short sale it is strongly recommended that you take the opportunity. Short sales are not fun or easy to pull off, and adding an expert opinion will greatly increase your chances.

Perhaps one of the first steps in offering anyone short sale help is to determine whether or not choosing to short sale their property is the right option for them to choose. Many different “professionals” will push for this option for personal gain, such as a realtor’s commission or a negotiating commission commonly charged by Chicago bankruptcy attorney and realtors alike. However it is first and foremost a last resort to be used only when all other options–such as a loan modification–have been expended. If you have simply fallen a little behind on your payments it is best to try other alternatives first, because, if nothing else, with a loan modification you get to have somewhere to live after the negotiations end and with a short sale you don’t. That’s nothing to shake a stick at.

However short sales are ideally suited for “under-water” homeowners with “upside down” property–that is to say, homeowners who owe more on their mortgage than the property is currently worth on the market. However even in those situations a homeowner can still ask their bank for a principle reduction first, and then reserve the short sale as a last ditch option that keeps their credit more or less intact but leaves them without a home.

Ultimately choosing the correct option is the responsibility of the homeowner (and family), and it is up to you to do your own research to educate yourself about how to short sale before approaching a professional in order to avoid getting taken advantage of by both the bank and the advocate you hired to defend your home. Make sure that you know the full range of options available to you in your situation before speaking to a professional about the best one to choose. Formulate your own opinions and prepare to challenge theirs’ in order to ensure that you get the most value for your money—after all, you’re fighting for your home here, not the remote. You need to be at the top of your game in order to make it out of a foreclosure situation with your skin intact, and even then the chances are not great. For example some websites list only 10% of short sales succeeding!

The key thing to remember is that everyone in the situation is acting out of self interest and business sense; unless you are employing pro bono or nonprofit advisers, of course. Use business sense to approach the situation—frame your argument in the context of being a good option to minimize losses on all sides and to help keep the mortgage company making money, even if it isn’t from you anymore.

What would you say if you found out that there is a way to avoid foreclosure on your property? Given the current economic climate many homeowners are discovering that if they learn how to short sale they can avoid most of the negative impact of a foreclosure and still settle their obligations to their lender. It is definitely not an easy process, but for many Americans over their heads in mortgage debt it represents the best chance they have to prevent a decade of bad credit and debt obligations extending well beyond the seizure of their property.

The biggest problem with short selling a house is navigating through the complicated process in time to prevent a foreclosure from taking place. Opting to short sell your house is ultimately an acknowledgment between the lender and the borrower that it would be more cost effective for both parties to cut their losses and sell the property for less than the mortgage is worth. This deal is normally unavailable in a seller’s housing market when buyers are beating down the door to make a bid, but one of the few advantages of the economic crisis is how willing many banks are to accept these arrangements for the benefit of all parties involved. In the end the bank gets to eliminate a defaulted debt for far less money than it would cost to foreclose and resell the property, the homeowner is able to avoid foreclosure and get out from under their mortgage debt, and the new buyer purchases a house at an extremely discounted rate.

Thus if you are at risk for foreclosure then it would do you good to find some short sale help from a real estate or bankruptcy professional and seriously explore short selling as an option. There is no money to be made in short selling–quite the contrary, in many cases!–but it represents a real chance to get out from under your debt obligations and get on with your life. However, unless you possess an inordinate amount of real estate experience it is highly unlikely that you can negotiate the process on your own. Find a good Chicago bankruptcy attorney to consult with about your options, and work with a negotiating firm to convince your lender that a short sale would benefit all parties involved. It is not always a pretty option, but for roughly 8 million homeowners in America it may be the best option, if not the only option to escape from a difficult situation.