Short Sales

A "short sale" - where the lender accepts less than is owed in exchange for a release of the collateral of the debt. By definition, where the lender takes it in the shorts. No lender is happy about that.

The Government is all over short sales. The HAMP and HAFA programs are designed to incentivize a lender to accept a short sale (if you think $3,000 for a loss that can sometime be more than $100,000 is an incentive...).

Many real estate agents are standing by to assist in a short sale - even though the process can take 9 months - or more.

Borrower/Owners believe short sale is "better" than a foreclosure.

Some lenders have entire short sale departments set up to do nothing but process these applications.

They wonder why it doesn't work? After all, it is not working.

Remember that there are two elements to every home loan; the note (or the I.O.U) and the collateral (in California, most often, a Deed of Trust). In a short sale, the lender releases the collateral - but not the underlying obligation. The Borrower/Owner is still responsible for the debt. In many ways it can be better for a Borrower/Owner to allow the property to go to foreclosure than to go through a short sale. Not always, but often.

Effective January 1, 2011, in California, new legislation compels a lender to release the underlying obligation on the first position deed of trust - if a lender accepts a short sale. So far so good. But that doesn't release the obligation of any second position deed of trust.

The rules change daily, weekly, monthly. Every Borrower/Owner's situation is different. The liabilities to Brokers and Agents also change when the wind shifts. (As recently as October 2010, new court cases impose liability on a real estate agent if certain, new, and undefined disclosues are not made.)

In this kind of ever changing landscape - competent legal advice is critical. That's what the Hanson Law Firm team brings to the party.

But even we don't do everything. If a short sale seller is confronted with the need to file bankruptcy, we refer them to Price Law Group - who have been serving consumers in need of bankruptcy assistance for over 20 years.

Learn more about Short Sales