Knowing the truth about foreclosure and short sales in Florida is an important step towards saving your home and property. Correct information followed by prompt, appropriate legal action is the key.
The Difference between Short Sales and Foreclosure
On the surface, the short sale appears to be an attractive alternative to foreclosure. In theory, a short sale transaction would help both borrowers and lenders during times of economic distress. Homeowners could avoid foreclosing, while lenders would have another means of collecting unpaid mortgage debt. Anything is better than foreclosure, right?
It’s never that simple. Plus, with thousands of short sale requests pouring in on top of the backlog of foreclosure cases, lenders are not equipped with the staff, experience or training required to handle the short sale requests.
Let’s examine the basics of foreclosure and short sales in Florida.
The foreclosure process begins when the lender files a lawsuit against you for not paying the mortgage payments. In Florida, the foreclosure case is tried before a judge. As the homeowner, you have a right to defend your case in court.
A home in foreclosure means your lender has completely taken over your property. Your lender has your home sold at a judicial sale, and they will take the highest offer. Often the lender has additional loss because the property drops in value.
Lean more about the Florida foreclosure process.
Short Sales in Florida
A short sale is entirely different. You still own your house, yet you owe more on the home than it is worth. In a short sale, the lender allows the house to be sold for less than the amount owed under the note and mortgage. The value of the home is “short” of the debt owed.
Short sales can happen only when the lender agrees to accept a smaller payoff. You will need to meet certain qualifications for the lender to agree. Among these qualifications are:
- you must not be able to make your payments from existing money or assets;
- you must establish your case for hardship;
- you must be able to substantiate that your home is worth less than the balance due to your lender.
A short sale is also reliant on a buyer actually making an offer to purchase. If you do not get an offer, you do not qualify for a short sale. So even if you meet all the other criteria, it is possible that no one will buy the short sale.
The short sale also depends on whether the lender accepts the buyer’s offer. If the lender declines the offer, the short sale will not happen.
The lender pays all the closing costs, realtor fees, second mortgage, home owner’s association fees and any liens that are on the house.
Finally, you will either owe the deficiency balance to the lender, or you may be released from the debt. Lenders often require homeowners in short sales to sign a promissory note, which is a written promise to pay back a loan or debt.
Short sales still affect your credit scores. If the impact turns out to be less than with a foreclosure, you should know if the credit benefit is worth the liability.
Find out more about the ramifications of foreclosure and short sales in Florida, and how your credit and tax status can be affected.
Who stands to gain from foreclosure and short sales in Florida?
Be careful of “debt counselors” and “foreclosure rescue” groups that say they can help you save your credit and avoid foreclosure by conducting a short sale. Their business is to benefit from your misfortune.
Capitalizing on foreclosure and short sales in Florida has become the mantra of real estate investors and scammers looking to turn a deal. Once they learn that a lender has sent someone a notice of default for being behind on their mortgage payments, the scammers descend to “help” the distressed borrower.
Many legitimate, non-legal services mean well, yet they are only able to offer short-term solutions that do not help you stop foreclosure through legal defense and prepare you for the long term.
Which is Better, Foreclosure or Short Sales?
The short sale may sound like a good alternative to foreclosure. The reality is, there are serious pitfalls to consider. The short sale is a viable solution in very select circumstances. The consequences of a short sale can be just as detrimental as the repercussions experienced with foreclosure.
The laws regarding foreclosure and short sales in Florida are complex. Your situation is unique. Let us help you create a sound plan that will lawfully protect your assets.
Contact us for a free consultation. Please do not wait, as time can work against you. We are ready to assist you with the experience and skill that can save your home.