With the continued decline of real estate market values, many homeowners are finding themselves locked into mortgages with outstanding loan balances greater than the property’s present value. This puts these homeowners in a precarious situation, with several unattractive options:
- The homeowner can make up the difference out of his or her pocket. Since the shortfall can involve tens or even hundreds of thousands of dollars, this is not a viable option for most transferees.
- The transferee can walk away from the property and let the lender foreclose, but this will ruin the homeowner’s credit, make it impossible to obtain a new mortgage and make it difficult to even rent a home.
- The “least bad” alternative, for sellers and properties that qualify, is often to persuade the lender to agree to a short sale. This means that the lender has agreed to accept less than the total due on the outstanding mortgage. The short sale will have an adverse effect on the transferee’s credit, but not to the extent a foreclosure would.
Short sales from a corporate perspective
If your company has offered an employee a position in a location that requires relocation, a short sale may be the only option for the employee to successfully complete the move.
The short sale is negotiated among the buyer, seller and the mortgage lender around the relocation management company’s guaranteed buyout offer.
In our next blog, we’ll go over how TRC Global Mobility can work with your company and the transferee to navigate the short sale process.