March 2011 Bar Bulletin
Is a Short Sale Really an Alternative to Foreclosure?
By Lynn Arends
I am both an attorney and managing broker. Most of my law practice involves negotiating debt and advising borrowers on foreclosure, deed-in-lieu, bankruptcy, short sales, and loan modifications. As a managing broker, I am predominantly a listing agent and most of my listings are short sales.
I start with a thorough, two-hour consultation. No one gets to see me as a real estate agent until they first see me as a lawyer. This is very important because, more often than not, a short sale is not the answer.
A short sale occurs when a bank agrees to accept less than what is owed on a mortgage or deed of trust to release its lien. Negotiated correctly, a short sale can be an excellent alternative to foreclosure to both sellers and buyers. And banks will consider a short sale because it allows them to recoup some of their investment without the work and expense of selling the home themselves.
New Obama administration initiatives, such as the Home Affordable Foreclosure Alternatives Program (HAFA) and recent changes to HUD’s Pre-Foreclosure Sales Program (PFS) for FHA loans, have made short sales an even more viable option in today’s current economic climate. But before signing up for a short sale, here are some issues to consider.
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