A short sale occurs when a home that is sold is worth less than the mortgage amount and the homeowner cannot make up the difference. For example, you sell a home for $75,000 but the mortgage is $100,000; you’re short $25,000. The bank enables the homeowner to sell the house by forgiving the $25,000 difference. So while the bank doesn’t own the house, the owner can’t sell it without the bank’s cooperation. Of course, in an actual short sale, the bank would be forgiving the mortgage amount, any other liens and the closing costs.
This is my best advice to pursue a short sale in Bergen County: Contact an attorney who specializes in real estate before you do anything. It is always best if you begin by being fully informed.
You do several things to get a bank to allow a short sale. Banks require homeowners to complete a “workout package”. Hardship letters are part of this package. They are written by the owner to explain the circumstances that led to the owner’s financial difficulties. Supporting documents are included too such as pay stubs and account statements. You need to make a strong case to get the bank’s approval.
Why would a bank do this? Because the other alternative is a foreclosure. Foreclosures cost the bank much more in time and money.
Why would a homeowner dos this? Because a short sale erases the debt. Banks forgive everything most of the time. They may insist on a promissory note for part of the loss sometimes. That’s still much better than a foreclosure.
Foreclosures do not erase debt. Debt collectors pursue you for years. They take your vehicles, garnish your wages, clean out your checking account etc. Your credit is ruined for about 10 years. That is a Titanic sized disaster. Short sales recover your credit in a few years. Debts are wiped clean. The IRS does not consider forgiven debt as income.
3,703 single family homes are for sale in Bergen County. Short sales total 346 or 9.3% of all homes for sale. They resolve a difficult situation for both banks and owners.