I help people out in the greater Oklahoma City area to avoid foreclosure. A short sale is where the lender takes less than what is owed on the property due to a provable hardship, does not send a 1099 to the IRS for forgiveness of debt tax, and does not seek a deficiency judgement which in Oklahoma can be and is being done. We are also a judicial state which means that from the beginning of default whihc is missing the first payment, to sheriff sale where the property is legally transferred, that can easily be a year's period of time.
DISCLOSURE: No Realtor who does short sales should ever tell a homeowner to quit making payments. At the very least that is unethical. Unfortunately we live in a Topsy-Turvy financial world where a loan modification does not happen if you are current on payments. They don't even want to talk to you at the very moment when they should. The longer these processes take, the more loss everyone experiences, except one, and that can be the homeowner.
Let me explain. Many short sales we start working with come after the property owner geta notice of les pendens . In Oklahoma this comes after six months typically. So if the payment was $1500 per month, then $9,000 is technically pocketed by the owner. If it takes 6 more months then that windfall goes double. Get my point? The owner is living in the property, paying to keep the lights on, but in a bizarre twist, can be reducing their debt elsewhere by being able to hopefully pay off things like credit card debt that may be eating them alive on interest.
Second DISCLAIMER: I am not your pastor, preist or spiritual advisor. I am not hired to make moral judgements. I leave that up to a higher power. I am human like you. Yes I can say that if you sign a note you should pay it. But if you were out $30,000 for cancer treatment that insurance did not pay for, that is all you had in savings, and you lost your job, I think for me to have that rigid of a moral compass is inhuman. I have had people ask me if they should stop making payments and i will always say that is not my place but here are the consequences. I do advise people that it is and all or nothing decision. if you owe $5,000 in arrears and you want to pay half of it, then it is typical practice that they put it into a escrow account and nothing is credited to principle and interest, so you are giving them free money and you will still go to foreclosure.
I know this was n ot the governments intention to reward people who can't pay. It was also not the orignal intention of the owner to loss their job, suffer medical bills unpaid, or get a divorce. Again. my job is to keep you out of foreclosure. if I can sell the house for enough to not go into a short sale, that's the best. If I can't, and you also don't have money to bring to closing then let's do the short sale. We all make mistakes and sometimes events conspire against us. Hopefully the system can change to help some, but if you can't get employment, no government bailout will help except one. If you are in this position, make the best of it. I may get criticism for this post, but I am just stating the facts. This happens, and I don't see an immediate end in sight. I will make this bold prediction: The next wave is coming and it is a potential tsumani. Option Arms and interest only loans are readjusting in the next five years with payments going up 20% to 80%. Sadly, I am part of a growth industry, short sales
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