The Illinois Law Group

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.

Before you jump up and start writing a classified ad to short sell your house step back and make sure you understand exactly how to short sale and what the pros and cons of the situation really are. In some cases a short sale can be a win/win situation for everyone involved (relatively speaking), but in other cases it is simply a long and complicated process that is only slightly more advantageous than a foreclosure. This depends on the timing, negotiating, and debt involved with your short sale.

The biggest and most flexible issue in a short sale is the negotiation; in fact nearly everything in these transactions is negotiation, negotiation, negotiation. Unless you are a retired trial lawyer or experienced real estate agent you will probably need professional short sale help to negotiate the best deal for your situation, lest you wind up continuing to be billed for mortgage debt after the house is sold. For example, lenders occasionally require the seller to sign a promissory note for the forgiven debt before agreeing to the sale–and sometimes they are even attached to other assets, starting the whole problem over again!

Assuming you do hire the best Chicago bankruptcy attorney or short sale realtor and follow their instructions to the letter there are still several results that you can reliably expect. To begin with, short sales are a zero profit venture for you, the seller. If you were able to make money from this transaction the bank would not even consider it. Also, unless specifically negotiated with the lender your credit rating with drop after the short sale, just not as bad as from a foreclosure. As a result you can forget the idea of signing another mortgage anytime within the next year or three; however, if you make your payments on all of your other bills and handle the short sale correctly your credit score will bounce back to its former luster surprisingly fast. By contrast, the sale itself takes place particularly slowly, up to 3 times as slow in fact. Not only does the negotiation process eat up time, but then the buyer must wait for the lender(s) to review and accept the deal before getting a response. In many cases the buyer simply walked away after waiting for several weeks or even months, leaving the seller in a real bind.

Obviously the cards are stacked against you in this game, but you knew that already. Getting yourself good professional advice will give you an advantage that might just tilt the game in your favor. It certainly can’t hurt!

Although unloading your house through a short sale might seem like a brilliant idea to you right now, you need to step back and be thoroughly sure that you know how to short sale and what the ideal situation to use this option is. To put it bluntly, a short sale is not a particularly good option for somebody who is simply looking to move into nicer digs–this is a complicated and risky process that should always be considered as a last resort for homeowners in financial distress. In fact, most lenders wont even consider a short sale unless the borrower can prove beyond a shadow of a doubt that they are in dire financial straights and cannot afford the mortgage payments. A short sale is, first and foremost, a business arrangement, and banks do not rush to enter into business agreements that do not benefit them.

It is recommended that you seek short sale help from professionals before you decide whether or not this is the correct option for your situation. If handled properly a short sale can be a winning situation for all parties involved–seller, buyer, and lender–but if handled poorly or too late you could lose your home and still owe the remainder of your mortgage. With that kind of risk it is fair to ask yourself why anyone would go through the hassle to end up in foreclosure anyway. The truth to the matter is that, when successful, a short sale can relieve a troubled homeowner of a large debt obligation, save the lender tens of thousands of dollars by avoiding foreclosure and then reselling the property, and give the buyer a rather large discount.

The biggest pitfall to watch out for is negotiating a bad short sale agreement with your lender. It may surprise you to find out that entering into a short sale agreement does not necessarily forgive you the remainder of the mortgage left over by the sale, and it can still result in damage to your credit rating that lasts for many years–essentially the same problems as a foreclosure. It is important to consult a Chicago bankruptcy attorney for advice and help with the negotiations in order to avoid ending up with all the disadvantages of a short sale with few of the benefits. As perhaps one of the most apt signs of the times there is also a booming industry of realtors specializing in short sales that can offer excellent insider advice, but it is worth noting that they may be receiving commission from your lender and others.

Believe it or not foreclosure is not the only option available to homeowners that are unable to meet their mortgage payments in this harsh economy. Even when refinancing your mortgage or working out a deal with your lender seem like impossible goals there is still hope: you can always speak with a Chicago bankruptcy attorney about short selling your property before the bank forecloses and you end up losing your home and still potentially owing money.

This might seem like a drastic scenario, but given the current economic crisis and the plummeting housing values many homeowners are finding themselves with overly ambitious mortgages, no jobs, and no buyers far more frequently than has been seen in the better part of a century. Thanks to this perfect storm of economic woes many homeowners are finding that they now owe more on their mortgages than the house is worth in the devalued market, so that even if they could sell the house they can hardly dream of receiving enough money to settle their obligations to the mortgage holder. These are precisely the situations that short selling was designed for, and any homeowner that finds themselves in debt over their head should immediately start teaching themselves how to short sale before the bank comes knocking.

Do some research on the internet to learn the basic short sale principles and orient yourself before reaching out to a talented bankruptcy or real estate attorney for advice. Once you are fluent in the terminology and familiar with the general framework it will be much easier to understand and participate in the negotiation process, drastically increasing your chances of sealing the deal. You will probably need short sale help to negotiate with your lenders, as in many cases it is simply not in their interest to forgive your remaining debt, particularly when it comes to second mortgages and other junior parties to your collateral. As you are probably painfully aware, banks are hardly in the charitable business.

However, they are in business, and can recognize a good deal when they see one. Always remember that foreclosure is expensive for both parties, and often accepting a short sale is a better and less costly option for the bank than foreclosing on your home. Rather than appealing to the mercy of the bank or hoping that they will be understanding of your financial situation, just appeal to their own self interest and make an offer that they can understand. And always remember that a short sale does not guarantee that you will not have to pay the difference in value on its own, you have to specifically agree on that clause in the negotiations!

If you have received a notice of foreclosure on your property or think you will get one soon then you need to take swift action. Far too often homeowners try to wait for the right buyer to come and save them from their troubles, only to end up losing their homes, damaging their credit, and even owing additional money after everything else is considered. Do not fall into this trap, make sure to contact a reliable Chicago bankruptcy attorney to advise you and teach you about your other options, such as refinancing your mortgage, bankruptcy, and especially how to short sale.

Short selling property is a tricky business, but one that can save you an immense amount of trouble and significant damage to your credit rating. Designed for “under-water” homeowners who owe more money on their mortgages than the home is worth on the (currently devalued) market, short sales are a difficult but valuable alternative to simply letting the bank repossess your property. For example, if you are an under-water homeowner who allows the bank to foreclose on your property, either through inaction or intent, you can still be held liable for whatever debt is left after the property is reclaimed. Not only do you lose your home and damage your credit score for years to come, but you still owe even more money, to boot!

Short sales are one of the better, but still not perfect, solutions to this problem. In effect you make arrangements to sell the defaulted property for less money than the mortgage is worth, with all proceeds going directly to the lender to repay your debt. The lender may then choose to forgive the remaining debt–but, you should be aware, they are not required to forgive the remaining debt. This is why short sale help from an expert is so important to successfully completing the transaction–a trained expert is a necessary defense to avoid being stuck in a situation that is only marginally better than an outright foreclosure.

Make sure to do your own research on the subject before you secure legal counsel in order to ensure that you can defend your own interests and are able to provide your attorney with the information and assistance they need to successfully negotiate a short sale with your lender. Remember, every party needs to agree to a short sale before it can happen, and if you hold a second mortgage or have other junior lenders with claim to your property you could have quite a bit of trouble trying to secure those agreements.