Avoiding the Short Sale Deficiency: What are My Options?

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If you’re living in a home with zero or negative equity and falling farther and farther behind on your mortgage payments, you may have considered or already applied for a short sale. When approved, a short sale allows the homeowner to sell a home for less than they currently owe the lender.

Oftentimes, lenders will ‘forgive’ this discrepancy amount, for several reasons. Big-name, well-known lenders usually want to maintain a good relationship and reputation with borrowers, and a short sale allows them to recover at least some of the money owed.

However, there are times (lenders) who refuse to forgive the deficiency amount and will sue the homeowner (who becomes the seller) for the difference between how much the home sold for and how much was still owed on the original mortgage.

If you are experiencing a lender who won’t forgive your short sale deficiency, and you have no way of paying said deficiency, it should be noted that going forward with the short sale is not your best option.

What, then, are your best options, you ask?

First and foremost, we would ask if there is any possibility of a loan modification making enough of a difference for you to be able to catch up on late payments. A real estate attorney will be able to negotiate with your lender to work out the modification details, if the numbers crunch just right.

If a loan modification isn’t able to budge the numbers enough to make it a real possibility for you to stay in the home, consider applying for a deed in lieu of foreclosure. Avoiding foreclosure in this way allows you to approach the lender rather than vice versa, and also avoids a Sheriff’s Sale of your home, which can be embarrassing.

For homeowners who get turned down for a ‘deed in lieu,’ the path that makes the most sense would be to file for Chapter 7 bankruptcy. Naturally, we cannot know if you would meet all of the necessary qualifications for a NJ Chapter 7 bankruptcy without having a look at all of your finances.

In a situation like this, it is in your best interest to meet up with a bankruptcy/real estate attorney in New Jersey who has experienced a lot of success pulling through for his/her clients.

Some important pieces of information to bring with you to your FREE consultation with your NJ bankruptcy lawyer include:

  • How much total (unsecured and secured) debt do you currently have? Bring as many credit card statements, auto loan invoices, mortgage paperwork, utility bills, etc as possible with you to your first meeting with your attorney.
  • Proof of any tax debt;
  • Your current and recent total income and expenses;
  • A list of your exempt and non-exempt assets;
  • Your credit score. Come with the most recent copy of your credit report, if possible. We realize your score will be low, but we want to have a starting point we can look back on as we work to get your score moving upward!

Second in importance to working with the right bankruptcy attorney is to GET INFORMED. Read all you can about your options, including:

We have a plethora of other helpful information that will aide you in getting prepared for your attorney consultation. Please visit our blog at your leisure. Like and follow us on Facebook to get real time updates on the successes we experience for our current clients. You can become our next success story!

Image credit: Images Money
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One Response to Avoiding the Short Sale Deficiency: What are My Options?

  1. Pingback: My Home has a Short Sale Offer; Can the Bank Still Foreclose? | Veitengruber Law

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