July 6, 2010
Dear George: Our lender offered us a short sale as an option due to the death of the primary borrower and loss of income stream. The property is FHA-insured. There is no equity due to a refinance in 2008. What are the pitfalls involved in
this scenario?
Answer: It's usually a good thing if your lender suggests a short sale, provided this lender is willing to negotiate. Try and negotiate a "no deficiency" provision. Otherwise, the lender may accept a lower-than-fair-market-value price knowing that he can file a deficiency judgment against you. A deficiency judgment is the difference between the loan amount that your mortgage secures and the amount obtained at the public auction by the lender or his trustee.
Investors are not likely to offer you fair market value. Therefore, we suggest you look for a buyer who is not an investor but who intends to move into it. Have you tried selling the property yourself? Or has the property been listed for sale through the MLS? Try listing it with a REALTOR® who agrees to an exclusive agency listing. This would enable you to sell the property but owe no listing fee to your REALTOR®, provided you obtain the buyer yourself without an introduction to the property by any REALTOR®.
E-mail a question to ask George & Chuck or fax it to 713-978-6684. The answers to questions in this column do not contain legal advice. If you wish to obtain legal advice, you should consult your own attorney.
