Rockland County Short Sale Lawyer

When homeowners begin falling behind on their mortgage payments, they often assume they have only two choices: somehow pay everything they owe or allow the bank to foreclose on their property. Fortunately, this is not always the case, and depending on the circumstances, a short sale may allow a homeowner to sell the property, resolve the mortgage, and avoid having the foreclosure process carried through to completion. That being said, short sales are document-heavy transactions that require the lender’s approval, which is why you should not try to tackle this process on your own. Here at the Law Office of Peter A. Hurwitz, PLLC, we have decades of experience helping homeowners protect their rights and stay in their homes, and we are here to put that experience to work for you. Contact a knowledgeable and skilled Rockland County foreclosure defense lawyer from our firm to learn more about the short sale process and how we can guide you through it.

What Is a Short Sale in New York?

A short sale is a real estate transaction in which a mortgage lender agrees to let a homeowner sell a property for less than the total amount still owed on the mortgage. The lender receives the proceeds of the sale, even though those proceeds may not be enough to cover the outstanding principal, interest, fees, and other amounts that have accumulated.

For example, if a homeowner owes $500,000 on a mortgage, but the property can realistically be sold for only $425,000, the lender may agree to approve a sale at the lower amount. Rather obviously, the homeowner cannot make this decision alone; the lender, mortgage servicer, and potentially any other parties with liens against the property must approve the transaction before it can be completed.

New York’s Department of Financial Services recognizes short sales as one possible alternative to foreclosure for homeowners experiencing financial hardship.

How Does a Short Sale Work?

The process begins when the homeowner submits a short sale application, sometimes referred to as a loss mitigation package, to the mortgage servicer. The home will typically be listed with a real estate agent, and once a legitimate offer is received, that offer must be sent to the lender for review. The process usually involves the following steps:

• Determining the property’s approximate fair market value
• Gathering the homeowner’s financial information
• Listing the property for sale
• Obtaining an offer from a prospective buyer
• Submitting the offer and short sale package to the lender
• Addressing junior mortgages, tax liens, or other claims against the property
• Negotiating the treatment of any remaining mortgage balance
• Receiving written approval before closing

It is important to understand that an accepted offer between the buyer and homeowner does not guarantee that the sale will occur, as the lender may reject the offer, request additional money, order another appraisal, or require changes to the proposed closing costs.

Furthermore, if foreclosure proceedings have already begun, homeowners should not assume that submitting a short sale application will automatically stop the case. Any postponement or suspension should be confirmed with the lender and reviewed by a short sale lawyer.

Who Qualifies for a Short Sale in New York?

Qualification for a short sale is largely determined by the lender or mortgage servicer after reviewing the homeowner’s finances, the value of the property, the loan balance, and the circumstances that caused the hardship. Typically, a lender will want to see that:

• The property is worth less than the amount owed
• The homeowner has experienced a legitimate financial hardship
• Continuing to make the required payments is no longer realistic
• The proposed offer reflects the property’s fair market value
• A short sale is financially preferable to foreclosure

Some of the circumstances that can support a short sale request are as follows:

• Job loss
• Divorce
• Illness
• Disability
• Reduced income
• Increased necessary expenses
• The death of a household wage earner

However, experiencing one of these hardships does not necessarily guarantee approval.

The lender may also examine the homeowner’s savings, income, investments, other real estate, and overall ability to contribute toward the unpaid balance.

What Documents Are Usually Required?

Short sales involve a significant amount of paperwork. Though requirements vary by lender, homeowners are commonly asked to provide the following:

• Recent pay stubs or other proof of income
• Bank and investment account statements
• Federal income tax returns
• Monthly mortgage statements
• A list of assets, debts, income, and expenses
• A signed hardship letter
• The property listing agreement
• The proposed purchase contract
• Proof of the buyer’s financing
• Estimates of closing costs
• Documents supporting the claimed hardship

Self-employed homeowners may also have to submit profit-and-loss statements, business bank records, and business tax returns. Since financial documents can expire during the lender’s review, updated copies may have to be provided more than once.

What Is a Hardship Letter?

A hardship letter is a written explanation of why the homeowner can no longer afford the mortgage and why the lender should approve the proposed short sale. Simply stating that the property has lost value is generally not enough; the letter should explain what happened, when the hardship began, how it affected the household’s finances, and why the situation is unlikely to be resolved in the immediate future.

A hardship letter should be truthful, reasonably detailed, and consistent with the other documents submitted, and exaggerating the hardship or leaving out significant assets can damage the homeowner’s credibility and may result in the request being denied.

What Are the Advantages of a Short Sale?

Perhaps the primary advantage of a short sale is that it may allow the homeowner to avoid a completed foreclosure and have greater control over when and how the property is transferred. It may also provide additional time to arrange housing, moving expenses, and other practical matters. Some additional possible advantages of a short sale are as follows:

• Avoiding a foreclosure sale
• Resolving an unaffordable mortgage
• Reducing certain foreclosure-related costs
• Limiting the period of uncertainty surrounding the property
• Negotiating how the remaining debt will be handled
• Potentially reducing the effect on future borrowing compared with foreclosure

That being said, homeowners must fully understand whether the lender is forgiving the unpaid balance. A short sale approval letter should clearly state whether the debt remaining after closing will be waived or whether the lender intends to preserve the right to pursue it.

Importantly, you should also understand that there may be tax consequences. Generally, canceled debt can be treated as taxable income unless a specific exclusion applies, and federal rules concerning mortgage debt relief have changed over time.

Contact a Short Sale Lawyer in Rockland County, New York Today

The bottom line is that no homeowner should sign a short sale agreement without understanding what will happen to the unpaid mortgage balance, existing liens, and potential tax obligations. If you are considering a short sale or are already facing foreclosure, the Law Office of Peter A. Hurwitz, PLLC can assess your situation, explain your available options, and help you determine the best way to proceed. Contact a skilled and experienced Rockland County short sale lawyer from our firm for an initial consultation today.