The intelligent alternative to bankruptcy or to a New Jersey foreclosure action by your lender
We all want to know about the unprecedented explosion in demand for attorneys who specialize in representing homeowners who must get rid of their homes through “short sales”.
Short sales in New Jersey are generally understood to be a sale where one or more mortgage holders agree to discount their debt so that the property can be sold at its current market value to a willing buyer. Currently, short sales account for a significant percentage of residential transactions in New Jersey and across the nation and the numbers appear to be increasing.
Short Sales a Market Force in the New Jersey Residential Market Place
More and more homeowners find themselves underwater caused by their mortgage debt. For owners who can no longer afford to keep mortgage payments current, a short sale is the intelligent alternative to bankruptcy or to foreclosure proceedings. Short sales can preserve a homeowner’s creditworthiness and can help homeowners avoid the harsh long-term consequence of a foreclosure.
Banks and mortgage holders have become extremely interested in offering short sale discounts in an effort to minimize their own potential losses and to avoid the protracted process of foreclosing, almost two plus years in New Jersey. Qualified New Jersey buyers, many of whom are prepared to invest significant down payments, are holding out for the lowest possible price. Mortgage holders agree to absorb the short sale discounts, enabling such qualified buyers to buy “discounted deals”.
For a seller in a short sale, the process tends to be both unique and complex. It usually involves intermediation between first and second mortgagees as well as the need for extensive drafting of agreements and releases. Real estate agents can often act most effectively as the preliminary negotiators. They initiate the short sale process by opening communication with loss mitigation officers, which in itself, is often a cumbersome process. Agents can provide property specific data to the lender and they can arrange for the homeowner to provide proofs of hardship which are required by mortgagees before they will consider the terms of short sale. While it is the real estate agent’s work that positions the loan for discounting by the lender, it is ultimately a skilled short sale attorney, representing the seller, who secures meaningful protection for his clients and who brings the short sale to a successful conclusion.
In a market where an increasing number of homes are no longer worth as much as the liens which encumber them, many consumers are no longer able to afford their scheduled monthly mortgage payments, and judicial foreclosures are taking longer and longer to complete, ultimately increasing the number of short sales transactions.
Loss mitigation officers, who negotiate short sales on behalf of the lenders, are besieged with applications for short sales, from all over the country without having adequate knowledge of the differences among applicable state laws. As a result, bottlenecks in the negotiation process occur and negotiations extend for several months. It is among these bottlenecks that attorneys with intimate knowledge of the “workout” process find themselves able to bring order out of chaos and to propose practical and effective short sale formats that can satisfy the needs of both the loss mitigation officer and the homeowner.
Looking Forward
The trend in short sales is expected to continue well into 2010. This is attributable to the recent failures of major mortgagees and to the fact that more adjustable mortgagors will experience the shock of payment “resets” in the first half of 2009. Reportedly, more such resets will occur in the first six months of 2009 than have occurred in any one full year period in American history. These resets are expected to generate a tidal wave of short sales. In response to the current number of defaults, and in anticipation of even more in coming months, the holders of securitized mortgages are increasingly opting for loan discounting as their alternative to protracted, and ultimately costly, judicial foreclosures. Simply put, short sales are cheaper and faster.
The increasing willingness of residential mortgage holders to grant discounts shows a preference for short sales as a practical means to cut their losses and to quickly purge their portfolios of at-risk loans. Homeowners and real estate agents find a shortage of attorneys who are specifically trained in the specifics of short sales – including the ability to make a case for mortgagees to discount their loan balances – enabling the homes to be sold. Eroding home prices have left many owners with mortgage debt that far exceeds selling prices of the mortgaged properties. While institutional mortgages have redeployed personnel into newly created, massive loss mitigation departments, there has not been a corresponding expansion among attorneys who clearly understand the protocol.
Hanlon Niemann & Wright and Fredrick P. Niemann, Esq. have developed real experience to become aggressive short sales negotiators and are currently in strong demand as residential real estate values continue to decline. The short sale attorney’s role is pivotal to the success of most short sales. For more information, contact our managing partner, Fredrick P. Niemann at fniemann@hnlawfirm.com. Or call him toll-free at (888) 800-7442.