From the Press of Atlantic City:
An alternative to foreclosure for some homeowners called a short sale is becoming more common in southern New Jersey, according to attorneys who handle such transactions.
Short sales are for homeowners who owe more on their mortgage than the property is worth and need to sell the house to get their finances in order.
For it to work, the lender must agree to accept as payment for the loan what the property is currently worth rather than the higher amount borrowed to buy it.
Lenders such as banks are free to insist on getting full repayment of the loan and many do, said attorney Jeffrey P. Barnes, of Stefankiewicz and Barnes in North Wildwood.
“But it sometimes makes sense to take the market value because the bank will be putting the property up for sale anyway if it goes through foreclosure after paying thousands in attorney’s fees,” Barnes said Friday.
As an example, Barnes told of a Pennsylvania couple who bought a second home in the Wildwoods. As a result of falling real estate values, they wound up owing $50,000 more for the condo than it was worth.
The couple had hoped to rent it out but couldn’t at a price that would cover their mortgage costs, he said. And they had taken out a home equity loan for the down payment on the second home and now couldn’t keep up with all the payments.
“They got quite emotional about it. They had always paid their bills, and they didn’t know what to do. They tried whatever they could to keep it going,” Barnes said.
When their savings were depleted, they looked for a solution and pursued a short sale. Their bank allowed it and in a couple of months, they got out of the second home, he said.