Has your home ownership dream in Massachusetts now become a nightmare? Have you fallen behind on mortgage payments? Are you facing foreclosure? If so, you should speak to a foreclosure attorney who can discuss your options and advise you about your rights.

As of 2020, over five million U.S. homeowners are “underwater” – meaning that they owe more on their mortgage than their home is worth on the current market.

If you are underwater and you’ve fallen behind on mortgage payments, a foreclosure and a short sale are among your options. The home will be lost with either option; however, the option that’s best for you depends on your individual financial circumstances.

How Do Short Sales Work?

A short sale takes place when a property owner voluntarily sells his or her property for an amount that is considerably below what that property owner still owes for the mortgage loan.

For example, in a short sale, a home might be sold for $200,000 although the owner still owes $250,000 for the mortgage loan. In short sales, lenders receive all the proceeds of the short sale, and property owners are still responsible to pay any deficiency – $50,000 in this example.

Will Your Mortgage Lender Approve a Short Sale?

Prior to any short sale, a mortgage lender will require documentation that explains why the short sale is a financially reasonable option, and the lender must concur with the choice to move forward with the short sale.

A lender will want to ensure that it does not lose money through a short sale. Lenders do not always consent to short sales and may have other options.

If a lender consents to a short sale, a buyer must negotiate first with the property owner, and the buyer must then gain approval from the mortgage lender for the purchase price. A short sale is a property owner’s choice, although it cannot occur unless the lender gives its approval.

What Happens in a Foreclosure?

Foreclosures are initiated by lenders and are not voluntary for property owners. In a foreclosure, a lender legally seizes a property after the owner becomes delinquent on mortgage payments. Foreclosure is something that most homeowners want to avoid.

Under federal law, mortgage lenders are generally prohibited from initiating foreclosures until a borrower is delinquent on a loan for 120 or more days. This 120-day window gives a homeowner the chance to find an alternative to foreclosure.

Should You Apply for Loss Mitigation?

Loss mitigation is the first option for many homeowners. If a homeowner applies to the lender during the 120-day window for loss mitigation, the lender may postpone the starting date for the foreclosure.

Mortgage lenders use loss mitigation to assist homeowners who are behind on their mortgage payments. With loss mitigation, a mortgage lender may revise the home loan, agree to a short sale, or transfer the home’s deed back to the mortgage lender.

Is Eviction a Possibility?

When a foreclosure begins, the mortgage lender legally retakes control over the home. If the owner and occupants haven’t abandoned the property by that time, the lender may evict them.

A short sale may be the best way for a homeowner to deal with a foreclosure and get out of an undesirable financial situation. A homeowner loses the home in a short sale, but the short sale relieves the owner from the mortgage debt.

Usually, homeowners would rather lose their homes through a short sale instead of a foreclosure. A short sale does not damage a homeowner’s credit rating, while a foreclosure can stay on a homeowner’s credit report as long as seven years.

Will You Be Able to Buy Another Home?

When you sell a home in a short sale, it’s possible – with several restrictions – to qualify for buying another home immediately, but if the mortgage lender proceeds with a foreclosure, it will be five or more years before you can qualify to purchase another home.

Homeowners may be able to receive relocation help – for finding another home – after a short sale closes. You can receive as much as $10,000 if you satisfy the Home Affordable Foreclosure Alternatives (HAFA) requirements. Your foreclosure attorney can determine if you qualify.

How Can a Foreclosure Attorney Help You?

Short sales are the best option for many homeowners who face foreclosure. Is a short sale your own best option? A Massachusetts short sales lawyer can help homeowners decide. A foreclosure attorney’s first step is a comprehensive review of your financial circumstances.

When a short sale isn’t your best alternative, your attorney may be able to suggest other options that line up with your long-term interests. But when a short sale is your best move, your lawyer can help you seek the lender’s consent and walk you step-by-step through the process.

If a short sale is the option you choose, you’ll also need a Massachusetts foreclosure attorney’s advice about the tax repercussions. In some circumstances, the monetary difference between the property’s selling price and the outstanding mortgage balance will be taxable income.

A Plymouth attorney will protect your rights in a short sale throughout the process. Your foreclosure attorney will also explain how a short sale will affect your credit rating and your taxes. When a short sale isn’t right for you, your attorney can help you seek better alternatives.

What Else Should You Know About Short Sales?

It usually takes more time to close a short sale than other property transactions take simply because the lender’s consent is required, meaning that additional paperwork will be needed.

Short sale properties are typically sold “as is,” because both the homeowner and the lender have no further incentive to invest in the home. Buyers expect a bargain, so they typically take the property as it is and do not demand to have repairs made before the closing.

What is Important to Remember About Short Sales?

To summarize, these are the main reasons many “underwater” homeowners choose a short sale:

1. Short sales help homeowners avoid a foreclosure’s negative consequences.
2. A short sale gives a homeowner more control over the home’s sale.
3. Homeowners can settle their mortgage debts for less than they currently owe.
4. Relocation assistance may be available.
5. A short sale doesn’t damage a homeowner’s credit rating.

If your home is at risk for foreclosure, speak promptly with a Massachusetts foreclosure and bankruptcy law firm. Your attorney can address your concerns, provide personalized advice, and help with a short sale or advise you about other options.