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Pursuing a Short Sale in South Carolina

After the housing bubble burst, millions of Americans saw the value of their homes drop by tens of thousands of dollars. Many now owe more on their mortgages than their homes are actually worth.

This can present a major problem if the homeowner wishes to sell the property, especially if the sale needs to happen because the mortgage is no longer affordable.

South Carolina residents in this situation would be wise to consider pursuing a short sale.

How Short Sales Work

In a short sale, both the homeowner and the lender agree to sell the home for less money than is due on the mortgage. The bank keeps the proceeds and applies them toward the balance of the mortgage.

Whether or not the homeowner is relieved of the obligation to pay the rest of the mortgage depends on what kind of deal is struck with the lender. For this reason, it is very important for homeowners to enlist the help of an experienced Charleston short sales attorney.

Generally, the homeowner's obligation after a short sale is dependent on whether the mortgage was a "recourse" or a "non-recourse" loan. If it a non-recourse loan, the lender can take the home, but cannot come after the borrower for the difference between the sale price and the mortgage value - called the "deficiency balance."

It is possible for a homeowner with a recourse loan to be relieved of the duty to pay the outstanding mortgage balance. However, these homeowners must convince their lenders to agree to forgive the obligation, ideally before the short sale process begins.

Further, it is important for homeowners to be aware that they may owe state and federal income taxes on the deficiency balance.

If you are considering a short sale, don't take risks by trying to negotiate the process by yourself. Get experienced help from someone who knows how to navigate the lender-borrower relationship.

Source: Fox Business News, "Struggling Homeowners' New Exit Strategy: Short Sales," Donna Fuscaldo, Feb. 1, 2012.

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