Short Sales are the Answer
With so many people facing foreclosure, and now that the banks are vacillating on their process, the option of going through a short sale has great validity.
In a short sale, the seller tries to get a contract on the property while many times the banks are going through their foreclosure process. Getting the home into the system while the owners are still in the property maintaining it, gives the house it's best exposure and keeps it safer.
Once a contract has been obtained and agreed to by the selelr, then the agent and their lawyer mount a full scale attack of correspondence and phone calls to the lender to get their attention, and get them to understand the validity of the contract and the minimal loss they will sustain. Everybody can come out ahead, including the bank.
I am going to bang a drum I have been banging since the sub prime crisis in 2007 began to erode the equity of so many people, and it is simple: if the housing market is going to recover, we have to have to do better than a 20th century solution to our 21st century problem. We are facing the largest liquidation of property in the history of the republic, yet banks are doing nothing differently to dispense with their toxic assets than they were in the 1930's, which is to foreclose, repossess, and dump.
I would strongly assert, having worked with default properties a chunk of my career, that short sales are the answer to restoring the market to equilibrium and recovery, and yet lenders still have to be dragged kicking and screaming to the closing table when they ironically net far less after far longer on the REO side, where they are suddenly in a ridiculous hurry.
The advantages are enormous:
- In a short sale, the bank doesn’t have to take 1-2 years to repossess the home. They avoid having a non-performing asset any longer than they have to. They get their money faster.
- In a short sale, there are no legal fees associated with a foreclosure. They save money.
- In a short sale, the bank does not have to manage the property, put the utilities in their name, or winterize the property except in rare cases. No preservation company expenses, property management overhead, winterizations or utility costs. They save carrying costs.
- No evictions. Short sales are seldom boarded up, vandalized, or vacant. They therefore net the lender more money.
- No sheriffs deeds, no right of redemptions headaches.
- No title ambiguities, which is a big concern in the wake of the foreclosure moratorium.
The short sales help the borrowers as well, because they are able to dispense with the property with dignity, avoid the credit catastrophe of a foreclosure, and re-enter the pool of buyers far sooner and with less shell shock and trauma the rest of their lives.
Sadly, the architecture of lenders is still that of 15, 25 and 50 years ago: None of the brighter bulbs work in liquidation or loss mitigation, and the staff on the REO side is the only part of their workforce motivated to sell and close. That is fine when foreclosures and distress are rare and relegated to deadbeats, but the USA didn't become a nation of deadbeats in the last 18 months, we had our bank accounts raided. We lost our jobs. We lost our equity. And folks deserve better than hourly grunts who lose faxes, watch clocks, and treat red tape like a badge of honor.
Moreover, the American people deserve executives who can show a modicum of remorse or contrition for their royal screw up, are willing to change their corporate culture to adapt to the need for more short sales in a shorter time frame, and, maybe, just maybe, stop referring to the property in abstract terms like "assets" when they should instead understand that these are their lifeblood customers, and the "asset" is that lifeblood's home.
It is a shame that there is no political will on either side of the isle to hold lenders feet to the fire to affect meaningful change, and defaulted homeowners must contend with a mad race to work a miracle with an uncaring, unresponsive monolithic entity before that monster forecloses, repossesses their home, wrecks their credit and crushes their dreams. This is not progress.
- We Are Westchester County & Hudson Valley NY Real Estate. Reach Phil at (914) 723-8900.
- J. Philip Faranda, Broker-owner, J. Philip Real Estate, LLC. 2010 Vice President, Westchester-Putnam Multiple Listing Service.
- I am one of New York's premier short sale REALTORS.
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