Surprised By The High Foreclosure Numbers? I'm Not...

Any Realtor® who has been in the trenches since the beginning of the year, and has worked with Short Sales, probably understands why the Foreclosure numbers that were released today were so high. According the the numbers released today, October 15, 2009, by RealtyTrac, the Foreclosure rate increased by 5% from summer to fall. I bet many of these homes were  unsuccessfully settled Short Sales.

I was fortunate enough to be able to sit in a Broker Only Short Sale Session with Lem Marshall, Special Counsel for Virginia Association of Realtors last week.  He spent a lot of time discussing how important the time line was to the successful settlement of a Short Sale. One of the problems discussed was that often, by the time the Realtor® is called in, the Foreclosure proceedings have been steadily moving along behind the scenes. If that is the case, the homeowner is probably running out of time to complete a Short Sale before their home is even listed.

Given how difficult it was in the mid- to late- Spring to get  Short Sales approved by many of the banks, it is not a surprise to me that far too many homes have gone in to Foreclosure. While Short Sale negotiations were going on, the Foreclosure process was moving along in parallel,  just in case the Short Sale deal fell through. As many of these deals did fall through, the banks were fully prepared to go to Foreclose (even sometimes when the Short Sale process was simply delayed).  For the banks, it is simply business; make the best of a bad situation.  If one Short Sale deal falls through, there is no telling when, or if, the next one will get to close, so they opted to go forward with the Foreclosure knowing it would move fairly quickly.

If you are a home owner who is feeling like they may need to get out from under a difficult mortgage, the lesson is not to wait too long.  This is not the time to bury your head in the sand and hope everything will work out.  Even if you have only missed one payment, you may have started the ball rolling toward bank Foreclosure. Even worse, if the missed  payment was a couple of months back, the bank may be counting every payment since as  a missed payment (this will vary from bank to bank, so be sure to check directly with your lender about your situation). Once the Foreclosure process has begun, there many not be enough time to complete the Short Sales process before Foreclosure is complete.

I hope this report is the last time that we see numbers like this.  Hopefully, as homeowners  learn more about the process and banks improve their in-house processes, it will be easier for homeowners to get the help they need--without ending up in Foreclosure.