Whether you currently own a home or you’re looking into purchasing in the future, it’s unlikely you paid or will be able to pay for the home outright. That’s why mortgage lending companies exist. You borrow money from the lending company that you pay back over the course of years—usually decades. While taking out a mortgage is typically considered “good” debt, because the home will have value after it’s paid off, what happens if you’ve in a financial situation where you’re overwhelmed by debt and are unable to continue to pay your mortgage?
Depending on your situation, you may be looking at foreclosure or bankruptcy. It’s important to understand all your options. We’ll take a look at what you need to know about short sales in Maryland.
The Purpose of a Short Sale in Maryland
A short sale, sometimes referred to as a pre-foreclosure sale, is one way to prevent foreclosure on a home. Essentially a short sale happens when a house is sold for less than what the owner owes for their remaining mortgage amount. Doing so gives a homeowner a chance to settle their debts without causing serious damage to their credit.
For a short sale to happen, the mortgage lender and homeowner have to accept less than the total amount owed to pay off the home loan. The lender will agree to accept the amount of the sale as full payment of the debt—even though it is technically “short.”
If the short sale takes place, the homeowner will no longer own the property. But, there are certain situations where they have the right to repurchase the home within a certain period. Your attorney will be able to advise you on your rights.
Overall, a short sale may be right for you if you cannot keep your home and want to avoid bankruptcy. If mortgage debt is ruining your personal finances, getting rid of that excess debt could help you afford other bills and slowly rebuild your financial health.
Experts Needed to Complete a Short Sale
If a short sale is right for you, you’ll want to be backed by a team of professionals who have extensive experience guiding homeowners through the short sale process. It’s likely you’ll want to work closely with a lawyer, real estate agent, and tax advisor.
A Baltimore bankruptcy lawyer will be able to guide you through the short sale process and ensure you understand your legal rights and options. Short sales are incredibly complicated, so it’s important to have the information you need to make the right decisions for your future.
Even with the nature of a short sale being what it is, you are still selling your home. As such, you should hire a real estate professional. It’s best to hire someone with extensive experience handling short sales. Hiring a realtor also shows the bank that you intend to follow through with the sale.
Finally, it’s important to work with an accountant or tax advisor. Doing so will avoid unnecessary stress. If you owe debt to someone that’s canceled or forgiven, you could learn the forgiven amount is taxable. The last thing you want to do is sell your house for less than you owe, only to find you’ve gone from having a mortgage problem to a tax problem. Having an accountant to look for possible tax consequences from a short sale will help avoid future financial problems.
How to Get Approved for a Pre-Foreclosure Sale
It’s important to understand that the decision to follow through with a short sale is ultimately not yours—it’s the lender’s. They will analyze the facts of your situation to determine if you are eligible to sell your home at less than what the outstanding debt amount is. If they agree, the lender is accepting the shortfall as their loss.
In many situations, it’s not easy to get a mortgage lender to agree to a short sale. This means that you have to provide the lender with a good reason as to why they should agree to the short sale—which could include avoiding the costs of foreclosure or avoiding forcing you into bankruptcy.
It’s important to note that in certain situations it could be better for the lender if you do file for bankruptcy. For example, if a bankruptcy judge forces you to file a Chapter 13 instead of a Chapter 7, the lender could get more favorable repayment terms.
Your lawyer will be able to give you an idea of how your lender will respond to your short sale request. They may be able to convince the lender that it’s in the best interests of both parties. If the lender is not agreeable, your lawyer can advise you on your next options.
Learn More From Baltimore’s Belsky & Horowitz, LLC
With the current household debt balance for the entire United States surpassing $14 trillion, you’re not alone if you’re dealing with unmanageable debt. In order to maintain your livelihood and secure your future, it’s important to discuss your legal options with a lawyer from Belsky & Horowitz, LLC. We have experience helping debtors with short sales, foreclosures, and bankruptcy, so we’re prepared to guide you through whichever process is right for you.
It’s important to understand that short sales take time. In fact, the average short sale takes considerably longer than the traditional home selling process. Because of that, it’s a good idea to learn about your debt relief options as early as possible. To get started, schedule a consultation with our firm today.