Short Sale Attorney Los Angeles
If you own a home and you are having a hard time making your mortgage payments, you may be at risk for foreclosure. Fortunately, there are a number of avenues you can pursue proactively as alternatives to foreclosure. For instance, you may be able to avoid foreclosure by completing a short sale, or a sale of your home for less than the debt that remains on the mortgage in order to pay off a portion of the balance due and be released from liability for the loan. If you are facing foreclosure in Los Angeles or the surrounding area and you think a short sale might be a good option for you, contact our knowledgeable Los Angeles short sale attorneys at Resnik Hayes Moradi LLP today. We have helped clients throughout Los Angeles and Southern California avoid foreclosure by completing a short sale transaction or another foreclosure alternative, and we can help you, too. Schedule a free consultation with our law firm and we will personally assess your case to determine whether a short sale would be a good option for you.
Reputable Los Angeles Short Sale Attorneys
When a mortgage loan goes into default in Los Angeles, contacting the lender and discussing a possible short sale as an alternative to foreclosure may be an option for the homeowner. As a homeowner, a short sale can be difficult, because you are essentially going through the process of finding a buyer and selling your home without the promise of a payout at the end, but in many cases, a short sale is better than enduring a public foreclosure sale, which can be time-consuming and expensive and will have a significant adverse impact on your credit rating. Whether you decide to pursue a short sale or another foreclosure alternative in Los Angeles, you need an attorney on your side who is familiar with the laws pertaining to foreclosures and short sales in California. When you choose Resnik Hayes Moradi LLP, you get a team of seasoned attorneys who will work tirelessly to represent your best interests and guide you through every step of the short sale process.
What is a Short Sale?
A short sale is a pre-foreclosure real estate transaction occurring when a financially distressed homeowner sells his or her home for an amount that is less than the remaining balance on the mortgage loan and the lender agrees to accept the proceeds as final settlement for the outstanding debt on the loan, even though the amount earned on the sale “falls short” of the total amount due. Once a short sale is completed, the lender will release the lien on the property and the borrower is thereby freed from any obligation to pay the remaining balance on the mortgage loan. In this way, a short sale is similar to a deed in lieu of foreclosure, which is another alternative to foreclosure, but with a short sale, you are actually selling the home, rather than just handing over the title to the lender. Both options release you from the obligation of paying back the mortgage loan and allow you to avoid foreclosure.
Is a Short Sale Right for Me?
A short sale may be a good alternative to foreclosure if you have been unable to sell your home at a price that would cover the amount you owe on your mortgage, if you have been unable to refinance your mortgage loan, and if you can prove to the lender that you are struggling with a financial hardship that prevents you from paying your mortgage and isn’t likely to improve in the near future. If you can show that a short sale is the best option you can offer, the lender may decide to approve the short sale rather than go through the long and expensive foreclosure process.
Benefits of a Short Sale
In the past, the process of completing a short sale was lengthy and complicated, bogged down by overwhelmed lenders unwilling to settle for less than they were owed, but the federal government has introduced financial incentives to encourage lenders to accept short sales, thereby making short sales more streamlined and effortless. Although it may seem like the lender is sacrificing a great deal by agreeing to a short sale, as an alternative to foreclosure, a short sale actually benefits both the borrower and the lender. Compared to a long, drawn-out foreclosure or the borrower’s continued non-payment, a short sale results in a less significant financial loss for the lender. And by completing a short sale, as opposed to a foreclosure or bankruptcy filing, the borrower can reduce the impact on his or her credit score and qualify for a new mortgage sooner. A short sale is also generally faster and less expensive than a foreclosure, which is why many homeowners who have defaulted on their mortgage loans go this route, and in some cases, borrowers may even be entitled to cash to cover their relocation expenses following a short sale.
What is Required for a Short Sale?
In order to qualify for a short sale in Los Angeles, the homeowner must meet certain requirements, the most notable being the existence of an ongoing, long-term financial hardship that prevents the homeowner from making his or her mortgage payments. Most lenders in California require that a financially distressed homeowner proposing a short sale provides proof of financial hardship, such as unemployment, divorce, a medical emergency or physical disability, with an explanation of the hardship documented in writing in a hardship letter. An appraisal must be done in order to determine the market value of the property and the homeowner must complete a short sale package for submission to the lender, consisting of income and expense information, the hardship letter, bank statements, tax returns, and other financial documents. In most cases, in order for a lender to even consider a short sale, there must be at least one offer from a potential buyer. Then, if the lender approves the short sale and there is only one mortgage on the property, the transaction can proceed. However, if there is more than one lien on the property, such as a second mortgage, home equity line of credit or tax lien, the short sale process can become significantly more complicated, which is why it is always a good idea to enlist the help of a knowledgeable short sale attorney.
Short Sales with Multiple Mortgages
Sometimes homeowners who have some equity in their home decide to take out a second (or third) mortgage on their property or obtain a home equity line of credit in order to complete a home improvement project, make a large personal purchase or pay back other debts. If there is a second mortgage on the property or a home equity line of credit, it can be more difficult to complete a short sale. Second and other subordinate lien holders want to obtain the largest possible payment for releasing their lien and can hold up a short sale transaction if they think they would be entitled to more money with a foreclosure.
Deficiency Judgment Following a Short Sale
One of the most important issues to consider when deciding whether a short sale is right for you is whether or not the lender can pursue a deficiency judgment against you once the short sale is made final. With regard to a mortgage loan, a “deficiency” represents the difference between what the property is worth and the amount due on the loan, and in some cases, a lender can file a lawsuit and ask the court to issue a judgment against the borrower for the unpaid balance on the loan if the funds from a foreclosure sale don’t cover the total amount due. Under California law, mortgage lenders are barred from pursuing deficiency judgments following short sales on residential properties with no more than four units, and so are junior lien holders if they agreed to the short sale terms.
Tax Implications of a Short Sale
If you are considering a short sale as an alternative to foreclosure, you are probably wondering what the short sale will mean for your income taxes. Previous to 2007, the IRS and state tax authorities considered any canceled or forgiven debt as taxable income, but after the housing market crash and the subsequent mortgage crisis, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, which permitted taxpayers to exclude as taxable income on their federal income tax returns any money that was forgiven from a mortgage loan on their primary residence. The state of California also passed the Mortgage Debt Tax Forgiveness Act of 2018, which mirrors the federal tax program’s treatment of forgiven debt, but for taxpayers’ state tax obligations.
How Filing for Bankruptcy Can Help
For some homeowners who have defaulted on their mortgage loan, filing for bankruptcy is another good alternative to foreclosure. If you have a second or third mortgage on your home and the value of the property has declined to the extent that what you owe on the loan is more than what the property is worth, you may be able to have some of the mortgage or liens on your property “stripped,” or removed through bankruptcy, which can increase your cash flow and help you pay your mortgage. If you have substantial debt and few assets, a Chapter 7 bankruptcy filing allows you to discharge your unsecured debts, which means you are no longer obligated to pay those debts and you can put some of that money towards paying your mortgage. If you have regular income and can afford to pay back all or some of your debts over a period of three to five years, Chapter 13 bankruptcy establishes a repayment plan that can help you catch up on past-due payments. Both Chapter 7 and Chapter 13 bankruptcy filings in Los Angeles are also accompanied by an automatic stay, which puts an immediate stop to foreclosure proceedings and any other debt collection actions by creditors.
Why Hire an Attorney?
If you are underwater on your property, meaning you owe more than the house is worth, and you want to offload the asset, a knowledgeable attorney who can negotiate with the lender and facilitate a short sale agreement can be an invaluable resource. At Resnik Hayes Moradi LLP, our short sale attorneys have more than 50 years of collective experience helping clients find alternatives to foreclosure in Los Angeles and the surrounding area, and we know what it takes to negotiate a successful short sale agreement. Or, if a short sale isn’t what you’re looking for, we can conduct a thorough assessment of your income, debts, and assets to determine whether there is another viable alternative to foreclosure that better suits your needs. For instance, some homeowners may not be willing to put the time, money and effort into selling the property, or they may want to stay in their home, in which case another foreclosure alternative may be a better option. Our reputable Los Angeles short sale attorneys at Resnik Hayes Moradi LLP are familiar with the various foreclosure alternatives available to you and we can help you determine whether a short sale is the best solution for your situation.
Our Los Angeles Short Sale Attorneys Can Help
Short sales are probably the most common foreclosure alternative in California and across the country, but it’s not always easy to convince a lender to allow you to sell your property for less than the amount you owe on your mortgage loan. However, if the lender does agree to a short sale and you can successfully sell the property and satisfy the terms of your agreement with the lender, you can reduce your financial cost and limit the damage to your credit rating, which will make it easier for you to recover financially. If you are behind on your mortgage payments and you think a short sale might help you avoid foreclosure, contact our experienced Los Angeles short sale attorneys at Resnik Hayes Moradi LLP today. We offer prospective clients a free initial consultation, which means you have the opportunity to discuss your case with our team of knowledgeable attorneys at no charge or obligation to you.
“The bankruptcy attorneys at Resnik Hayes Moradi LLP provided us the peace of mind I so desperately needed. I was not sure what to do and I felt like I was at the end of my rope. They were there the entire step of the way and gave me the necessary information I needed to make the right choice for my family.” – Dave B.