As the number of underwater mortgages continues to rise, short sales have become a popular way for Chicago homeowners to avoid foreclosure without filing for bankruptcy.
Unfortunately, homeowners are finding out that a short sale can quickly go from a saving grace to a nightmare. Quite often, a Chicago bankruptcy would have provided a more successful outcome.
As the Chicago Tribune recently illustrated, many lenders are overwhelmed by the sheer volume of calls and requests they're getting from homeowners looking to refinance, get a loan modification, or complete a short sale.
As a result, banks are refusing to approve a large number of short sales - even if homeowners are qualified and buyers are already lined up.
According to the Tribune, it can take months - or even years - to get a sale approved, even for those who persistently call and e-mail their bank.
The reality is that your lender has absolutely no obligation to negotiate any sort of deal. Whether there are small errors in your paperwork or the bank believes it can get a higher price by selling the property on its own, you may be out of luck.
Even when lenders are willing to participate in a short sale, the battle isn't over yet.
Often times, properties are sold for less than the amount of the debts secured against them, leaving a collectible balance. Unless this remaining debt is formally extinguished, the note can be transferred to a collection company.
At best, a short sale simply resolves the ownership of your home, but doesn't do anything to settle debt. At worst, the process can turn your life upside-down with no guarantee of any benefit.
Many borrowers assume that seeking a short sale as an alternative to foreclosure will prevent a stain on their credit report.
However, if you've missed multiple house payments and other bills, your credit is already considerably tarnished. And just like with foreclosure, a short sale ultimately leaves you without a home - or a means of applying for a mortgage in the future.
In most cases, it's unsecured debt - not the mortgage - that's at the root of the problem. Many homeowners seeking a short sale have stopped making house payments in order to have more money to juggle other expenses.
Filing for Chapter 13 bankruptcy can provide a better solution. By getting a grip on large unsecured debts, homeowners can get current on mortgage payments, stay in their house, and - with the help of Chicago bankruptcy lawyers - eliminate debts.
More Blog Entries:
'Short Sale Hell' All Too Common, by Ilyce Glink & Samuel Tamkin, Chicago Tribune