What Is a Short Sale?

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What Is a Short Sale?

Under real estate laws, a short sale occurs when a home is sold at a lower amount than what the homeowner owes on the mortgage. These are usually sales that are used as a foreclosure alternative, and in many cases the seller is in default with their mortgage loan. Short sales can be favorable for borrowers because they may help them avoid various fees associated with foreclosure (although the borrower may end up with a negative credit report).

The unpaid balance owed to the lenders is called a "deficiency." In some states, the lender can recover these unpaid amounts through a deficiency judgment. Other states have anti-deficiency laws that prevent a lender from collecting more than what was put up as security for the home.

What Are Some Legal Issues to Consider with Short Sales?

A short sale can sometimes be a high-pressure transaction that involves many different legal issues compressed into a short period of time.

Some legal issues to consider with a short sale may include:

When dealing with short sale legal issues, it’s always recommended to review and legal documents and forms carefully before signing them. This will help you to gain a better understanding of which agreements must be formalized in writing.

Do I Need a Lawyer for Help with Short Sale Issues?

Various types of legal issues can make a short sale more complicated. In order to avoid hang-ups during the short sale process, it is highly advisable to work with a real estate attorney for advice and guidance. Your attorney can provide you with legal advice and representation when it comes to the short sale process. Also, your lawyer can provide you with representation in court during a lawsuit if necessary.

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Last Modified: 08-20-2014 12:04 PM PDT

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