Short Payoff vs. NJ Short Sale: Which is Right for You?

nj short sale

Understanding Short Payoff

 At Veitengruber Law we strive to help our clients in individualistic ways. When referring to New Jersey law and short payoff there are requirements that we can help you more easily navigate with the lender. In a situation where a short payoff might be a better financial solution for you than a NJ short sale, here is some preliminary information that will be helpful.


Short Payoff is a newer, alternative option for the borrower to consider when facing a foreclosure. This involves the option for the borrower to keep the property and pay back the lender at a reduced amount, especially if the homeowner owes more than what the property is currently worth. This could be the ideal answer if the borrower is NOT having trouble with mortgage payments.


Not all lenders will be willing to work with this option however, and as mentioned before, Veitengruber Law can help you in navigating key requirements.


Short Sale Basics


A short payoff should not be confused with a short sale. A short sale would inevitably involve you losing your home but you would also be able to avoid foreclosure. The process of a short sale and New Jersey law involves selling the property to a third party at a price that is less than the amount the homeowner owes on their mortgage. This option also involves the lender agreeing to the sale price as satisfying the homeowner’s debt. For example: the home is valued at $250,000 and the homeowner finds a buyer for $200,000; the lender must then agree to the price of $200,000 and release the mortgage despite being “short” of what was originally owed, thus resulting in a short sale. The homeowner must also be able to show that the market value of the home was decreased.


This is generally the right solution if a homeowner is having trouble making the monthly mortgage payments on time or at all, because continuing along this path usually leads to default, which then leads to foreclosure.


Short Payoff Key Requirements


There are clear criteria you must meet in order for a lender to consider a short payoff as a means to resolving your debt. You would be required to pay off the debt in a single payment because there are no payment plans. This would also entail you being able to acquire the funds with respect to your damaged credit, which often involves another person becoming involved who is not a borrower on the loan. On the flipside, if you have good credit, a short payoff can be beneficial if you are simply looking for an option allowing you to move away from the property.  This may require establishing a substantial market value decrease while also being able to show a proper income and excellent credit. Short payoff also requires the completion of an application similar to a short sale or modification instead of facing foreclosure.



How Do I Decide?


Now the question is ultimately:  Short Payoff or. Short Sale?  How do you decide which is the best option for you?  A short payoff would likely leave you with little negative affect to your credit while getting rid of the property.  A short sale would be ideal if you are behind or will begin to be behind on mortgage payments, in order to avoid foreclosure.


Veitengruber Law can help you navigate with lenders and New Jersey law regarding both options. We pride ourselves on offering a thorough FREE holistic debt relief evaluation to get you started on the right answer for your situation.




NJ Short Sales: Explained

NJ short sale

Changes in the economy and instability in the housing market have presented major challenges to homeowners in New Jersey. Homeowners may find they owe more on their house than what it is worth on the market. Sometimes, it only takes one unexpected life event (divorce, illness, disability, job loss, etc.) for homeowners to find they cannot afford their mortgage payments anymore. Making the decision to leave a home is never easy, but the attorneys here at Veitengruber Law are experienced in offering compassionate, competent counsel to achieve a favorable outcome for our clients. As a debt solutions agency, our team is skilled in NJ real-estate transactions and short sale negotiations.

In a short sale, a property is sold for less than the balance owed to the lender. The lender agrees to basically give a financially burdened mortgager a discount on the balance of a mortgage. Short sales tend to be less harmful to credit ratings and comparably quicker than a foreclosure. That being said, the short sale process is certainly not “short” and there is no established legal limit on how long the process should take. There is a plethora of paperwork and fine details to work out in a short sale and the process can take months, or even years. The attorneys at Veitengruber Law have invaluable knowledge and experience navigating the complexities of any short sale to give our clients peace of mind during this process.

The first step in a short sale is to contact a realtor to perform an assessment on your home’s fair market value. Veitengruber Law has strong relationships with area real estate agents experienced in short sale negotiations. After the home has been assessed, the next step is to list the house for significantly less (where the term “short sale” comes from) than the actual value of the home. If effective, the drastically reduced price will drive bids for the property.

In order to agree to the short sale, the bank or lender will need to see evidence of severe financial difficulties. The lender will need to understand why you cannot afford the mortgage payments, whether for medical, financial, or personal reasons. This can be explained in a letter of hardship. The more detailed the letter is, the better picture it will provide the lender of your financial stress.

It is important to note that while a short sale is not as damaging to your credit rating as a foreclosure, the lender is still taking a financial loss and subsequently your credit score will be affected. Typically, short sales will affect a credit report for 7-10 years. However, a short sale shows that you took action before the bank had to intervene, which looks much better to future lenders. There is also another important benefit to a short sale over a foreclosure. In some cases, a homeowner can receive some compensation in the form of relocation costs. So while you will not be making a profit by selling your home, you can receive financial assistance to help you establish a new residence.

The process of short sales in NJ can be intimidating and overwhelming. But you are not alone in this process. Veitengruber Law is here to protect your interests. We serve clients in Atlantic County, Monmouth County and Burlington County. Set up a consultation with us today at our offices in Wall or Bordentown.

Image: “House for sale…” by jongorey – licensed under CC 2.0