By: Mike Schmidt
Question: What is a "short sale" and how can I avoid common pitfalls in a short sale transaction?
Answer:The rise in home foreclosures over the past few years has been accompanied by a rise in "short sales" (sales in which the proceeds fall short of the balance owed to the lender). Short sales not only help homeowners avoid foreclosure, but in appropriate circumstances, they may also help mortgage lenders avoid the costs of foreclosure and property ownership. However, there are also pitfalls involved in short sales. Lenders and others considering short sales should be aware of a number of schemes that can disadvantage, or even defraud, a mortgage lender in a short sale transaction. These schemes include:
Lenders and others considering short sales can protect themselves from these schemes by knowing what to look for, requiring full disclosure from the homeowner/seller before approving a short sale, and possibly pursuing fraud claims when appropriate.As originally printed in the Journal of Business - Spokane, in November 2010. Banking & Financial Law
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