Hoboken Law Blog

By now most people have heard about "Short Sales" and here Short Sales and it seems that the more you know, the more complicated it gets. In trying to come up for an accurate metaphor that would encapsulate the entire short sale experience I first thought of a roller coaster:

First you going up and then your going down, then up and down again, all the time with a slightly bad sense of impending dooms, sounds like a short sale to me.

Then I thought about how it feels to be bumped from one person to another person by the bank mitigation department and visions of bumper cars came to my head:

Life in the fast bumper car lane is a lot more fun when your Father doing the driving is the Leader of the free world.

Then I thought about how you go from call to call, and though you seem to be moving ahead you find out that just when you thought you are at the end, you are forced to begin again, and I envisioned a merry go round go around and around

Most banks have what they call a short sale process, but it's more like a short sale merry go round.

I then realized it was the long lines that really summed up the short sale experience. For whatever reason the entire process is mostly about waiting and waiting for your turn to have your short sale reviewed:

This about sums up the feeling of waiting for your short sale to get approved.

It seems so simple,you want to sell your home, your mortgage is more than the value of the property, you have a buyer that is willing to buy your home for market value, the bank cannot get more money for the property if it forecloses, so the bank should allow the closing to occur and jut agree to take less then it is owed on the mortgage.

After all, Obama has personally promised to help you out of your financial problems

After all, the Banks have received billions in bailout funds and are obligated to help homeowners.

After all, it is not that complicated.

After all, it is just not fair that you should suffer because you did nothing wrong.

All the above make sense but the reality is that their is no real safety net for those people who bought into the real estate market in 2005 to 2007. The billions of dollars spent on bailing out the banks was not designed to bail out individual homeowners with negative equity. The hard fact is that in addition to the billions lost by the Banks, there has been billions and billions of equity lost by home owners that is not being bailed out by the Government. There is no plan, no laws, no rules, no government money designed to bail out individuals.

As almost a cruel joke, there is one law designed to help out homeowners, its the Mortgage Forgiveness Debt Relief Act of 2007, whereby in certain circumstances, a homeowner does not have to pay federal income tax on debt forgiven on a loan secured by a qualified principal residence via a short sale, foreclosure, deed in lieu, loan workout or short refinance where the loan amount was reduced and forgiven in order for the homeowner to keep the property. In other words the government wont tax you for the amount of debt the bank agrees not to demand from you. That's all there is, and there ain't no more.

The fact is that you are on your own when it comes to dealing with mortgage debt that is more than the value of your home. Everything else is a myth.

Each bank is free to set its own rules and change them at will, each bank can decide how long and complicated the process will take, each bank can decide when to enforce a deficiency judgment, each bank can decide to answer or not answer the phones.

From my perspective, your only solution is to stop paying your mortgage and use that money to prepare for the short term effect of a bad credit rating in the immediate future. Find a good Realtor and list your home for a price slightly under it's real market value and hire an attorney, not a negotiator, to start on the process of putting together a short sale package for the bank.

As a point of reference, in a straightforward case I charge $1,500 for an upfront fee, and at least $1,500 for a closing fee. My job is to prepare a package to the bank for the short sale, maintain constant communication with the bank and negotiate a settlement. Sometimes the bank the forgive any deficiency, sometime they will forgive part of the deficiency, sometimes they will not forgive the deficiency and proceed to closing.

There is no guarantee but doing nothing is guaranteed to force a foreclosure and be charged with the full deficiency. Call me if you have any questions and need help, all I can promise is to do my best and keep you informed of the process.