Do yourself a favor.
If you own a house, and if your house only has a little bit (or no) equity in it, then before you hire your divorce attorney, ask the divorce attorney if he/she knows what a Short Sale is. Don’t take “yes” or “no” for an answer – have the divorce attorney explain it to you.
Why? Because divorce attorneys should know what a Short Sale is, but not all do.
One such clueless attorney evidenced such stupidity to me today, “Well, okay, we can list the house for sale and do a Short Sale as long as it doesn’t affect my client’s credit report.” Who are these people who refuse to educate themselves?
In case you’re wondering, let me explain what a Short Sale is:
- Let’s say that you owe $350,000.00 on your mortgage.
- Let’s say that you’re getting divorced and you and your future-ex-spouse have decided to sell the house (probably because neither of you can afford the house on your own).
- Let’s say that when the realtor comes over to list the house for sale, the realtor tells you that comparable houses in the area are selling for about $270,000.00, and that you should probably list your house for $279,000.00.
- “Oh, I see,” you say to the realtor. And then you think about your $350,000.00 mortgage balance and ask, “Well, how will we pay-off the $350,000.00 on the mortgage if we only get $270,000.00 from the house sale?”
- Then your realtor says, “With a Short Sale of course.”
- With a Short Sale, your mortgage company agrees to accept less money than you owe on the remaining principal balance of the mortgage, and the mortgage company FORGIVES and does NOT come after you for the remaining monies due.
- Without a Short Sale, you would be forced to bring the remaining monies due to the house sale closing (because no buyer is going to close on a house that still has a mortgage lien that is not FULLY satisfied).
- Thus, the term “SHORT” – as in, you will be “Short” on the money that you owe to your mortgage company, and “Short” as in your mortgage company will accept your final pay-off amount despite it being “Short” several thousands of dollars, and “SALE” as in you are able to “sell” your house despite not being able to pay-off the full amount due on the mortgage principal.
When I explained that, of course a Short Sale would be negatively reflected on the parties’ credit reports, the divorce attorney flipped out. The attorney then thought that the better course of action was simply not to list the house for sale.
Oh, right, let’s allow the house to go into foreclosure instead of selling the house in a short sale. Now why didn’t I think of that?
Do yourself a favor and get an attorney that understands money – in fact, quiz ‘em! Otherwise, you might just pay for the privilege of your divorce attorney unraveling any good that might have a chance of coming out of your divorce.
