Short Sale Laws
Short sales may make financial sense to both the lender and the borrower, but the laws governing them don’t always do. And as many homeowners have learned, short sale law affects your lender’s decision and even how you plan out your finances afterwards. What are your rights and responsibilities as a short sale buyer or seller? Which short sale laws are the most relevant to your case? This article provides some answers.
Short sale law states that borrowers have the right to negotiate discount loans on their mortgage balance. This means they can ask to speak with the bank’s loss mitigation department, which usually handles short sales and foreclosures, and get assistance or at least some useful information. So as soon as you miss a payment (or even before, when finances start to get tight), call up your lender and see what your options are.
Banks aren’t required by short sale law to approve every borrower’s request, but they do need to look at each case thoroughly. Make their work easier by presenting your case as clearly as possible and avoiding unnecessary details. Focus on the fact that your hardship was out of your hands, and that a short sale is your best option. You can cite relevant short sale laws if they help strengthen your case, but make sure to get it reviewed by a short sale attorney.
Many people have second thoughts on short sales as they can pull down credit scores. There are no short sale laws preventing banks from reporting short sales negatively, and in most cases, there will be a significant reduction. But short sales are much easier to clear than foreclosures, which can stay in your report for up to ten years. Ask your lender beforehand if they have any policies on the credit effects of short sales.
One of the best motivations to choose a short sale is that the government is now supporting it. Previously, government aid was given only to loan modification, which has not helped as many people as expected. With new efforts to encourage short sales, we can expect short sale law to become more borrower-friendly in the next few months. Find out whether you qualify by calling your bank or consulting a short sale attorney.