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Utah Senator Forced to 'Short Sell' His House

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By Andrew Chow, Esq. on May 22, 2012 8:02 AM

The nation's housing crisis has hit another member of Congress. Utah Sen. Mike Lee was forced to sell his home in a short sale, resulting in a $400,000 loss, The Salt Lake Tribune reports.

"It's not fun," Lee told the Tribune. "But you do what you have to do when income doesn't match your outlays. You have to pare your outlays down."

Lee's wife and three children are now living in a rental home in Alpine, Utah, where they used to live in a "dream home" Lee bought for $1.1 million in 2008. But Lee soon found himself underwater.

Utah Sen. Mike Lee was elected to office in 2010, when he left his private law firm and gave up a lucrative salary. Lee's ex-firm later filed for bankruptcy, the Tribune reports.

As the housing market continued to sputter, a neighbor's home went through a short sale, causing home prices in Lee's neighborhood to drop even further. That's what forced him to also enter into a short sale, in which a buyer paid about $720,000 for his $1.1 million home, according to the Tribune.

In a short sale, a seller with a mortgage must get the mortgage lender's approval to sell the home at a loss. Sometimes it's the only way for a homeowner who can't keep up with mortgage payments to get out of an underwater mortgage.

But in some cases, a lender will not completely release a homeowner from liability for the amount of money lost in a short sale. That's why it's often wise to bring in a real estate attorney who can help negotiate the best deal and perhaps reduce the amount a homeowner owes.

Mike Lee isn't the only member of Congress to face tough choices because of the housing market. Illinois Rep. Joe Walsh faced a foreclosure on his condominium in 2009, the Illinois Daily Herald reported.

"It certainly is something that is painful to go through," Sen. Mike Lee told the Tribune about the short sale of his dream home. It's now owned by the vice president of a telecommunications company.

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