Do I Have the Right to A Short Sale?
Often these days I am asked by potential short sale sellers whether they have the “right” to a short sale. Hmmmm. As in a constitutional right to a short sale? No…not yet at least. I know there is a lot of talk these days about loan modifications and short sales in the media and on the streets. But, it is important to know that there are still no guarantees about the short sale process. In order to better answer that question though, I would like to clarify that there are at least two types of short sales. One is a “traditional” short sale and the other is run through the HAMP/HAFA process.
If the lender who holds the first mortgage on your home has agreed to participate in the HAMP/HAFA program, you might have the “right” to be considered for a HAFA short sale. However, you could still fail to meet the eligibility requirements for the HAFA program. You could be ineligible for a number of reasons, including the amount of your income. And, even if you are accepted into the HAFA program, there is a possibility that your short sale may not close. You don’t have the “right” to a successful short sale. You could fail to locate a buyer, your second lender could refuse the offer made, or your first lender could rely on an inaccurate BPO. So, even if you qualify for HAFA, it is still important to select an experienced short sale agent to guide you through the process. Often, whether a short sale will close will depend almost entirely on the experience and tenacity of the agent involved.
In a traditional short sale, the approval decisions are generally completely permissive, meaning the lender (or investor) gets to decide whether you “get” a short sale or not according to their own (often undisclosed) eligibility requirements. Under a traditional short sale application, what type of loan you have and/or who guarantees it can play just as big a role as the degree of your financial hardship. Indeed, although the conventional wisdom is that financial hardship is required for a short sale, the reality is that a lender can approve a short sale without a showing of any hardship if they think that is the best decision for them. Do you have the right to ask? Well “right” may be too strong of a word. I have on occasion been told by a lender that they don’t “do short sales.” Of course, that information usually turns out to be false! So, again I’ve found that tenacity plays more of a role in the completion of a short sale than any “right.”
An exception to this might be if your lender has agreed to consider short sales or loan modifications as a result of litigation or a settlement agreement. In those instances, you could be loosely “entitled” to some sort of relief, but the devil will be in the details of the agreement made or the judgment entered. Check with an attorney to determine your eligibility for this type of relief.
The short answer I would give is still no. There is no general “right” to a short sale.
Those considering foreclosure, loan modification, short sale or bankruptcy should solicit the advice of a competent attorney and tax professional before deciding on a course of action. The information offered on this blog does not constitute legal advice or tax advice. If you, your attorney, and your tax advisor determine that a short sale is the best course of action for you, I will be happy to assist you through that process.
Serving Santa Maria, Orcutt, Nipomo, Los Alamos, Santa Ynez, Los Olivos, Solvang, Buellton, Lompoc, Arroyo Grande, Grover Beach, Pismo Beach, and Avila Beach.
*Nothing in this article is intended to solicit listings currently under contract with another broker. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement – this article does not offer legal and tax advice. A short sale approval cannot be guaranteed. Mint Properties is not affiliated with the government and my services have not been approved or endorsed by the government or any particular lender.
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