Wednesday, March 12, 2014

Real Estate Short Sales on Maui

A short sale can be attractive for the investor, the lender and the homeowner. Short sales can also be complicated and risky for the ill-advised. 

There are several reasons why a homeowner might consider a short sale.  Typically the owner has encountered financial difficulties and has defaulted on mortgage payments.  An owner may consider a short sale if a buyer is available and if the lender agrees. 

Most mortgages have a due-on-sale clause which allows the lender to "call" the entire amount of the loan due if the owner sells the property.  In a short sale, the lender agrees to let you sell the property to someone else and accept less than the amount of the whole loan. 

Lenders will carefully evaluate if you just want to get out of your loan or if you are truly unable to make your mortgage payments.  To this end, mortgage companies will usually require some evidence of financial hardship before agreeing to a short sale.  If it appears that you are actually going to walk away from your mortgage and give up the house, despite the risks, a lender may agree to accept less than the original amount of the mortgage to recoup at least some of the money it has loaned you.  The foreclosure process can be time consuming and expensive, particularly in Hawaii, and smart lenders will try to avoid foreclosing on a property if possible, even if it means taking a loss on the loan. 

Homeowners should carefully consider the whether a short sale is appropriate.  A short sale will harm your credit rating.  Possibly as much as a foreclosure.  However, a short sale can also allow you to obtain another mortgage sooner than if your house is foreclosed upon.  Seeking legal advice may be wise if you have any questions at all regarding a short sale because unwary homeowners may still be required to pay the remainder of the loan. 

Homeowners also face the challenge of finding a buyer willing to purchase their property.  The short sale buyer is typically an investor who is willing to negotiate with a mortgage company and has the experience and funds necessary to make a complicated real estate transaction occur smoothly and quickly.  Attorneys who are experienced in foreclosures, short sales and other real estate transactions are often in contact with investors who may be willing to purchase a short sale property. 

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