A real estate short sale occurs when residential property is sold for less than the outstanding amount remaining in an existing mortgage loan. It is called a "short" sale because the lender comes up "short" in terms of making profit on the sale. Short sales usually occur when a person has a mortgage default and is unable to complete mortgage payments. Facing foreclosure, they may agree to a short sale in order to avoid certain foreclosure fees and tax consequences.
There are a few legal issues that commonly arise in a short sale lawsuit. For short sales, the seller will have to obtain an accurate appraisal of the home in order to determine at what price it should be sold. Since short sales usually involve homes that aren’t new, this means that the price may have depreciated unless renovations have been made.
The appraisal process can sometimes create a space for short sale fraud or dishonest marketing to occur. For instance, if the house is sold at a price that is far more or far less than its reasonable market value, then it can cause legal problems for the seller and for future buyers. A lawsuit may be necessary to determine the home’s true value and to reimburse any party for losses caused by a fraudulent appraisal.
Another issue in a short sale lawsuit is whether or not the mortgage company can collect more than what the borrower owes. In some cases, the lender may reach the borrower’s other property (such as their car) in order to make up for lost profits. In other states, the lender is only limited to a certain amount that they can collect, even if it means that they will lose profit on the sale.
Due to the issue of lost profits, a common legal dispute is whether a short sale should be allowed to occur in lieu of foreclosure. If the lender stands to lose a large sum of money from a short sale, they may try hard to enforce a foreclosure by judicial sale of the home.
Short sales can sometimes involve important legal decisions that need to be made in a short period of time. This can create various pressures which might lead to errors or inconsistencies during the sales process. It’s in your best interests to hire a lawyer for assistance with a short sale lawsuit. Your attorney can provide you with valuable legal advice during the court proceedings, and can help you obtain the remedy that is appropriate for your claim.
Last Modified: 07-19-2013 10:55 AM PDTLaw Library Disclaimer
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