This blog was written by a colleague in Northern Virginia. Short Sales are not nearly as rampant in Roanoke VA as they are in other parts of the Country but they are certainly here.
Home Owners should definitley consider a short sale as opposed to being foreclosed on. There IS an alternative exit stragedy. There are Agents who are trained to deal with short sales. Seek out a CDPE (Certified Distressed Property Expert), and yes I am one!
SHORT SALE MISCONCEPTIONS COULD BE MISSED OPPORTUNITIES FOR AGENTS.
IS KISMET AT WORK IN THE MYSTERIOUS WORLD OF SHORT SALES??
SHORT SALES HERE, SHORT SALES THERE, SHORT SALES EVERYWHERE. The significant number of short Sale listings and sales these days have led to the misconception on the part of many agents licensed within the past 5 years or so that Short Sales.
Kathy Schowe writes today about a Gentleman who made $1,000,000 in the past years but now wants to sell his home as a Short Sale.
The ubiquity of Short Sales caused by the mortgage mess is unique to the real estate industry. However, SHORT SALES are not new and agents with some years in the business have likely been through a few of them in the past.
WHAT'S THE DIFFERENCE NOW???
- Value of the property - $300,000.
- Owner owes - $450,000.
- Estimated loss - $150,000.
That's a $150,000 loss that the owner's mortgagee(s) is expected to take. Further, the mortgagor, the owner who purchased the property, lived in it for some time fully expects to complete a Short Sale transaction and be left with no liability for the deficiency beyond a reduction in credit score. A reduction in loss of credit score that will be less than that they would experience with a foreclosure.
The difference in Short Sales now and in years that predated 2004 or so is that the mortgage company or investor is now expected to take the loss.
SHORT SALES OCCUR ANY TIME A PROPERTY TRANSFERS AND THE SALES PRICE IS LESS THAN THE OWNER/SELLER OWES ON THE PROPERTY. Over the years, as a Buyer's Agent, I have represented a number of home buyers who purchased homes whereby the seller owed more than that for which they could sell their home. In order to complete the sale, the OWNER/SELLER came to the settlement table with money to pay the mortgage company the difference in what the home was selling for and that which they owned. I've had closings whereby the sellers came to the settlement table with $10,000, $25,000 and one time over $70,000. It was still a Short Sale.
Short Sales whereby the banks take the loss are a very recent phenomenon.
The thought of a mortgage company taking a loss on the sale of a property was unlikely and foreclosure was the naxt logical step if the owner/seller didn't have the resources to cover the loss.
SO, WHY ARE THINGS DIFFERENT NOW??? LENN'S EPIPHANY!
- On the average, short sales sell for more than the same property after a foreclosure.
- Short Sales result in better public relations for the bank than a foreclosure.
- Short Sales avoid the lengthily FORBEARANCE offered to owners with government backed loans.
HUD (and VA) FORBEARANCE. Compare the relative short typical Short Sale transaction of 3-10 months with that of an FHA loan and the HUD forbearance of 1 to 2 years. With a short sale, the owner often continues to make mortgage payments, albeit perhaps not as timely as before, but the band is offsetting their loss. With a HUD forbearance, the home owner may not make a payment for 1-2 years before accepting a modification of their loan or the property going to foreclosure.
BANKS THAT FORCE FORECLOSURE OF EVERY PROPERTY IN DEFAULT contribute to the serious decline IN market value of communities. Market adjustments are often good for an inflated market, but severe declines eventually cost the banks, the home owners and the taxing income of local municipalities.
OPPORTUNITIES FOR LISTING AGENTS. Before you dismiss that owner as a Short Sale because the bank doesn't accept their HARDEHIP, it is sometimes possible that a seller will pay the difference themselves. It will surely benefit an owner with the resources to pay the deficiency themselves rather than have a credit report showing a deed in lieu of or foreclosure or even a short sale with the deficiency taken by the bank. A good credit report is, after all, money in the bank.
KISMET. One thing we've learned about financial institutions that take severe losses in the market place is that profits are enjoyed by the financial houses and their investors. Losses are suffered by the tax payers.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.