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How can business owners utilize a short sale?

Since the housing crisis began, many South Carolina homeowners discovered the benefits of opting for a short sale over foreclosure. Although much of the attention regarding short sales has been focused on residential real estate, the same underlying issues affect businesspeople who own commercial property. Although many of the same principles apply, selling a piece of commercial property on short sale may include concerns not present in those involving homes.

Just like homeowners, business owners can fall behind on mortgage payments. When this happens, lenders can pursue foreclosure action as well. However, many Charleston business owners may have financed their property transaction with a government-backed loan from the Small Business Administration. Though short sales are possible in this scenario, there are definitely some potential challenges to consider.

When the government releases a property owner from their duty to pay back the balance of a mortgage and pursue a short sale, they often reserve the right to pursue a deficiency judgment, which is an important topic we recently covered on this blog. Additionally, they may be able to garnish future wages to recoup the balance of the loan. The shifting dynamics of the commercial real estate market may play a role in whether or not the government agency will pursue these mortgage deficits.

Just because there may potential hurdles in a real estate transaction, such as a short sale, doesn't mean that distressed business owners shouldn't explore or pursue available options to prevent foreclosure. By accurately assessing the implications of a specific short sale, property owners can proceed in the way that best allows them to escape an overwhelming mortgage and mitigate damage to his or her personal credit.

Source: Herald-Tribune, "SBA must be reckoned with during a short sale," Jan. 14, 2013

  • Our firm has helped many South Carolina residents through the short sale process. To find out more, please check out our short sales page.

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