Has your dream of home ownership in Oklahoma turned into a nightmare? Are you falling behind on payments and facing foreclosure? Before you take any other action, speak first with an Oklahoma City short sale attorney who can explain your rights and protect your best interests.

Many homeowners are dealing with an “underwater” mortgage – when the balance of the mortgage loan is higher than the fair market value of the property. In 2019, more than five million properties in the U.S. were underwater, more than nine percent of all U.S. properties.

If you fall behind on your mortgage payments and your mortgage is underwater, your options include a short sale or a foreclosure. You will lose the home either way, but which option is best? That answer will depend on the details of your personal financial situation.

What Is A Short Sale?

A short sale happens when a homeowner voluntarily sells the property for a sum that is substantially less than what the homeowner owes on the mortgage.

For instance, you could sell a home for $150,000 even if you still owe $200,000 on the mortgage. In a short sale, the lender receives all of the proceeds from the sale and releases the homeowner from the original loan even though it has not been completely paid off.

What Is Required Before The Short Sale Process Can Begin?

However, before a short sale happens, the mortgage lender must agree to the decision to proceed with a short sale. The lender will need to see some documentation explaining why a short sale makes financial sense.

Otherwise, a mortgage lender could lose a great deal of money with a short sale. Short sales are not always approved by lenders, who sometimes have better options.

If the lender gives the go-ahead for a short sale, the homeowner can list the home on the market with the help of a real estate agent. The potential buyer negotiates with the homeowner first, and then the buyer seeks approval of the final purchase price from the lender. Every short sale is voluntary on the homeowner’s part, and no short sale can happen without the lender’s approval.

How Do Foreclosures Work?

Foreclosures, on the other hand, are involuntary for the homeowner and initiated by the mortgage lender. The lender seizes the home legally after the borrower falls too far behind on payments. For most homeowners, foreclosure is the option that they want to avoid.

Federal law generally prohibits mortgage lenders from initiating a foreclosure until the borrower is more than 120 days delinquent on the loan. The 120-day time frame gives you time to work out a way to avoid foreclosure.

What Is Loss Mitigation?

One option for some homeowners is loss mitigation. If you apply to the mortgage lender for loss mitigation during the 120-day period, the foreclosure start date might be further delayed.

Loss mitigation is a process used by mortgage lenders to work with homeowners who are delinquent on their home loans. The purpose of this process is to avoid foreclosure and lessen the loss to the lender. Through the loss mitigation process, a lender may agree to modify the terms of a home loan, approve a short sale, or have the deed transferred back to the lender.

Does A Short Sale Offer A Homeowner Any Advantages?

A short sale is one option for avoiding foreclosure and removing yourself from a negative financial situation. A short sale means losing your home, but it also relieves you from mortgage debt.

There are several reasons why most homeowners would prefer a short sale to a foreclosure. If you sell your home through a short sale, you may – with some restrictions – qualify to buy another home right away. Homeowners who have been through a foreclosure may have to wait for up to seven years before they qualify to buy another home with a conventional mortgage.

You may qualify for relocation assistance – to help you find another home – when the short sale closes. If you meet HAFA (Home Affordable Foreclosure Alternatives) requirements, you may receive up to $10,000. Your attorney will be able to tell you if you meet the HAFA requirements.

Is A Short Sale Right For You?

Clearly, a short sale is the right option for many people facing foreclosure, but is it right for you?

In the Oklahoma City area, the right foreclosure attorney can help you determine if a short sale is your best alternative. The first thing your attorney will do is to evaluate your complete financial situation.

If a short sale is not your best option, your lawyer can probably suggest alternatives that are more in line with your best interests. But if a short sale is indeed your best option, your attorney will help you work with the lender and guide you through the complicated short sale process.

If you decide on a short sale, you will need the advice of a foreclosure attorney regarding the tax implications. In some cases, the IRS may determine that the difference between what the property was sold for and your outstanding loan balance is taxable income.

What Will A Foreclosure Attorney Do To Help You?

An Oklahoma City foreclosure attorney can ensure that your legal rights are protected during the entire short sale process. Your attorney will explain the impact of a short sale on your taxes and credit rating. If a short sale is not your best option, your lawyer will help you find alternatives.

Short sale homes are listed and then offered to potential homebuyers. It often takes longer to close on a short sale than other real estate transactions because lender approval is required and additional paperwork is involved.

Properties are usually offered “as is” in short sales, since both the lender and the homeowner usually have no incentive, at that point, to invest further in the property. Homebuyers expect to get a bargain with a short sale, so they usually take the home as is and don’t ask for repairs.

What’s Important To Remember About Short Sales?

In summary, here are the reasons why some homeowners with underwater mortgages choose the short sale option:

1. A short sale helps you avoid the negative repercussions of a foreclosure.
2. The short sale option gives you more control over the sale of your home.
3. You can settle your mortgage debt for less than you owe on it now.
4. You may even qualify for relocation assistance.

If you are at risk for losing your home, speak to an Oklahoma foreclosure attorney who can answer your questions, help you launch the short sale process, or help you pursue another option.