You may think, “My house is under water. I guess it will have to go into foreclosure.” That couldn’t be further from the truth! In many divorces, a short sale is the answer. A short sale takes place when the amount owed on the mortgages is more than the sale price. In situations like this, many banks are willing to do a short sale as long as there is some life changing permanent event in the lives of the homeowners.
Very often, a couple in the middle of divorce cannot afford to pay their mortgage or maybe, non-payment of the mortgage is part of what led to the divorce. If you have missed 2 or more payments, most likely, the bank has already contacted you about those missed payments. Think about it – the bank doesn’t want your house. They are in the business of making money, not selling houses. Therefore, the bank will do everything in its power to either continue getting money from you or recoup the money they have already lent you.
If you contact the bank and ask to do a short sale, many banks will inform you that you must go through their loan modification process first. That’s fine, if they insist. The first the thing to convey is your hardship reason, namely that you are getting a divorce and no longer have the income to sustain the house. This is a permanent, long term reason and usually gets their attention. Depending upon the reason you give the bank, they may tell you that you do not have to go through the loan modification process. If they say you do, regardless, just go through the process, all the while telling them you want a short sale. Eventually, they get the idea.
During this process you should be putting your house on the market with a realtor who is familiar with short sales and you should hire a lawyer familiar with the process as well. This makes a difference. During the short sale process, there is a lot of collection of documents, negotiation with the bank and paperwork that needs to be completed by the realtors. A realtor versed in short sales can make or break approval by the bank. Be aware, the process, depending upon the bank, can take quite some time. Some banks will have an approval of a short sale to you within 3 months but more likely, the process will take more like 6 months and in rare occasions, can take almost a year. Be prepared for a lot of jumping through hoops with deadlines attached to those hoops!
In the end, if the bank forgives the debt, it’s worth it. Your credit report does not have a foreclosure on it, and you are divorced without owing any extra money. You and your ex-spouse will be free to move on with your lives without the extra baggage of a foreclosure.
If you need more information about short sales in a divorce please contact Lyons & Associates. At the Law Office of Lyons & Associates, we represent men and women throughout New Jersey who have unresolved family law matters, including real estate issues. We place a premium on personalized service and attention. For a private consultation, contact us online or call our office at 908-575-9777.
Written By: ChrisAnn Wright, Esq.