If you owe more on your home than what it is worth, and you can't afford the payments any longer, you may be able to short sale your home. This means that you can sell the home for less than what it is worth to avoid a foreclosure. When you are doing this, you have the option of consulting with or hiring a real estate attorney to guide you through the process. Since this is likely your first time considering or doing a short sale, you may have many questions about whether or not you need to or should hire an attorney to help you. Here are three frequently asked questions you may have about this and the answers.
Is a Lawyer Needed to Short Sale a Home?
No. A lawyer is not needed to short sale a home. In order to short sale a home, you need to convince the lender to agree to short sale a home and find a buyer willing to pay the amount that the bank or lender is willing to sell the home for. Typically, a real estate agent is willing to find a buyer and work with your lender to accept a short sale on your behalf. However, there are a few benefits to hiring an attorney to assist you with your short sale.
What Are the Benefits to Working with a Lawyer When Doing a Short Sale?
While you do not have to have a lawyer assist you with the short sale, there are things that an attorney can help you with that a real estate agent can't. Typically, a real estate agent will present proof to the lender that you can't afford the payments any longer, price the house based on fair market value and then find a buyer willing to pay as close to that value as possible. However, what you may not realize is that a deficiency judgement can be issued against you, or the difference between what you owe and what you sell the house for can be counted as income, and you may have to pay taxes on this amount. A lawyer can assist you with this.
A lawyer has the ability to negotiate deficiency judgements and mortgage forgiveness with the lender. This can ensure that the lender doesn't come after you for the difference between what your home sells for and what you owe or that you don't have to pay taxes on that amount. There are different ways that they can do this, such as showing a lender that you are facing a financial hardship or showing that you are insolvent. In some circumstances, filing bankruptcy may be necessary. An attorney can look at your entire situation and determine if a short sale is the best option for you and advocate not only to get the short sale done but protect you against judgements or taxes when you do sell the home.
Can a Lawyer Help if the Home Has Already Been Short Sold?
It is advised that you consult with a real estate lawyer prior to short selling your home to ensure your best interests are protected during the process. But, if you have not done this, and you find yourself looking at a deficiency judgement or a 1099-C tax form from the lender, you may wonder if an attorney can still help you. Fortunately, an attorney may still be able to assist you, though the options they have may be limited. Once a deficiency judgment is granted, the lender has little incentive to negotiate the amount you owe. While there may be a few willing to accept a smaller amount, typically filing for chapter 7 or 13 bankruptcy is your best option for getting rid of the judgement. If you have received a 1099-C tax form, a real estate attorney can argue the valuation of your home, helping to reduce your tax liability, or help you file tax paperwork, showing you are insolvent and can't afford the taxes, depending on your situation.
Deciding to short sale your home can be a difficult decision. However, if your home isn't worth what you paid and you can't stay in the home, it may be the only option you have. Unfortunately, while you may think you are doing what is best to alleviate your financial situation, you may find out later that you complicated it. A real estate lawyer can help you determine if a short sale is right in your situation and put you in the best possible situation to avoid any future financial surprises from the lender or the IRS. For more information about short sales, talk to an experienced real estate lawyer.