Understanding Short Sales: As foreclosure rates hit record levels, more sellers are turning to short sales as a way to avoid foreclosure. So, how does it work? In a short sale, the seller arranges with their mortgage lender to accept a price that's less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn't have to go though a foreclosure, the buyer picks up a property at somewhat of a discount, and the lender avoids taking on the burden of unloading the property.
Sounds good right? Well, sellers need to know that a short sale may damage their credit, though not as much as a foreclosure. Also, lenders generally will only agree to a short sale if the seller is many payments behind and has received a default notice. Buyers may get a great property at a discount, but they also will need to know that the process can take up to several months (sometimes longer) and go through some extra paperwork too. Not to mention, they also need to be prepared to roll up their sleeves if that new property needs fixing up as lenders generally will not pay for any repairs.
Contact me today if you have any questions about short sales and if you will qualify!
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Frank Wible
Regional Director
Foreclosures/Short Sales/REO's
RE/MAX All Pros
office: 856-228-7990
fax: 856-228-4433
cell: 856-745-7700
fwible@remax.net
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Unfortunately, what is happening is most people are doing everything they can to save their homes through Obama's new plan and the "Keeping Home Affordable Plan". However, once the truth is reviled that most people will NOT qualify for a loan modification, there will be a huge surge of homes going on the market for short sale.-----This is a quote from my blog in January 2009. The press release below from RealtyTrac is showing that my prediction is right.
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Foreclosures in April exceeded even March's blistering pace with a record 342,000 homes receiving notices of default, auction notices or undergoing bank repossessions, according to the industry report.
One of every 374 U.S. homes received a filing during the month, the highest monthly rate that RealtyTrac, an online marketer of foreclosed properties, has recorded in four-plus years of record keeping.
"April was a shocker," said Rick Sharga, a spokesman for RealtyTrac. "I would have bet on a dip because March foreclosures were so high. Instead, filings were up from March and rose 32% compared to April 2008.
There were 63,900 bank repossessions in April, the last stop in the foreclosure process. More than 1.6 million homes have now been lost to foreclosure since the market meltdown began in August 2007.
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Frank, Not to bag on you personally, but some of your info is a bit vague and off target. In a short sale the seller arranges to sell the property at "fair market value". (Not necessarily at a discount.) Most banks will hire an appraisal service to verify that the purchase contract falls within an agreed upon range of the BPO or appraisal. If the offer is too low, you'll generally get a counter offer.
The main benefit to the seller in a short sale is that the debt shows up on the credit report as "paid as agreed" because the lender had to "agree" to do the short sale, right? I've sold houses to people two months after their short sales were successfully completed, so it really is much better than a foreclosure.
As far as Realty Trac's "foreclosures in April" doom news, last Dec, Jan, Feb, many loan modification specialists had advised their clients to stop making their payments in order to get the lender's attention and to take action. The truth is, this advise is no longer necessary.
Just recently I've seen loan mod clients rewarded by receiving substantial debt reduction by being patient and continuing to make their mortgage payments on time. One client, for example, had owed $348,000 on their first loan and got a new loan rewritten for $168,000 --almost $200k of debt forgiveness -- just for being patient and making their pmts. So the word on the street with loan mods is to "make pmts on time".
The bold prediction I made in January 2009 is that by June 2009 the real estate market would be getting much better, not worse; not that I'm a psychic, I just figured why not see the glass that way? Every great invention starts with a single thought. So why not imagine the market getting really hot during the summertime?
Is it really "unfortunate" that people are trying to save their homes? Maybe a better message to broadcast is one that encourages a more positive twist. The glass is half full as lenders are hiring more staff to work out the kinks in the pipeline, etc.
Because in times of uncertainty, most people will always look at others to check their reactions and then follow. So if people see others buying, they'll buy. So be careful what you accentuate. In my so-called "bad" market here in Los Angeles where Fox News incessantly beats the doom and gloom drum about the real estate market, the reality is that there are plenty of sellers experiencing multiple offers. In fact, the LA Times recently did an article on "disappointed buyers" who have been looking for bargains only to find others flocking to see any new listing (94 at one house within an hour) because of the Internet, and Twitter, etc. so as a result, most realtors in my area have to advise purchasers to be aggressive and bid higher than list price or they won't be able to buy.