The Andres Lopez Law Firm

How does a short sale work?

Previously, this blog has discussed various ways a Florida homeowner or business owner can defend against a foreclosure action. After all, even responsible Coral Springs residents may, due to unforeseen circumstances like a layoff, a medical problem or even a divorce, can find themselves unable to keep up on their house payments or with their businesses.

Oftentimes, the best foreclosure defense is to try to work out an alternative to forcing the bank to legally take one's real estate and sell it at auction. One such alternative is a short sale.

As the name implies, a short sale can take place when a lender is short on the funds to repay a loan and, for that matter, does not have enough equity in their home or business to cover the loan. Basically, an owner will agree to sell his or her real estate at a price that is less than the outstanding balance on the mortgage.

Before the sale can close, however, the lender has to approve the short sale. This can be a tricky process. For one, the borrower will have to convince the bank that there really is no equity in the home, as the bank may prefer to hold out until home values rise. Moreover, the borrower will also have to prove that he or she really is in financial hardship. The bottom line is that the bank is only going to agree to a short sale if it sees the process as an attractive financial alternative to foreclosure.

It may take some advocacy to convince a bank to approve a short sale. Likewise, short sales can affect a person's credit and may also have tax consequences. For this reason, it may be important to seek the help of an experienced legal professional.

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