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What about mandating Short Sales?

By
Real Estate Agent with Lamacchia Realty, Inc.

What about mandating Short Sales in the wake of this national crisis? According to the Center for Responsible Lending, a nonprofit research group, "it's projected that between 10 and 13 million foreclosures will have occurred by the time this crisis abates". Research has shown foreclosures cost everyone money - not only the immediate parties involved; but it also impacts the neighborhoods, towns and states due to decreased home values; resulting in decreased tax revenues. As the economy slowly recovers, why not mandate lending institutions work with distressed borrowers and in turn bring positive solutions to negative situations. If borrowers cannot obtain a loan mod, why not work with them on a short sale so the borrowers can walk away with their dignity, while helping another borrow achieve the "American Dream" of home ownership?

http://www.dsnews.com/articles/with-millions-of-foreclosures-on-horizon-states-should-mandate-mods-report-2010-10-28

Comments (2)

Hercel Spears
Advanced Realty Education HomeSmart Realty - Tempe, AZ

This is a slippery slope to start down. 

Mandate:An authoritative command or instruction. To make mandatory, as by law;

Let's put this shoe on our foot.  Let's say that the impression of the public towards real estate agents is that they were motivated by commission and were also one reason to our current crisis and so the government "mandates" we must reduce our fees for service or commissions.  Would we line up to force this on ourselves.

Lenders are notorious for not seeing the big picture and although it may be in their best interest to streamline the short sale process, to force them to alter a mutually agreed to contract is un-American. 

If the goal is to keep home prices up *(??) then a better solution would be to do loan modifications and keep the number of homes for sale down.  The lower the supply verses demand the higher prices go.  Again, I don't want a mandate for this action, but in the big picture the banks/lenders would be "stabilizing" the value of their collateral.

*One other question I would add to the discussion, "If prices were artificially high, and most intelligent folks admit they were, then why are we working so hard to keep them high?"  It seems the lower prices go, more folks can afford to buy. 

I think we are looking in the wrong direction for the solution to our current crisis.  We really should be looking at ways to create jobs that will allow folks to buy the over abundance of inventory we now have.

Thanks for bringing this subject up for discussion Anthony.  Hope we get some good ideas from it.

Oct 29, 2010 04:26 AM
Anthony Lamacchia
Lamacchia Realty, Inc. - Watertown, MA

Hercel

Thanks for your response and thoughts!

I just re-read my blog and it was not clear enough.  What I mean is banks and the government are so quick to tell every borrower  to "try a loan mod" instead of telling the borrower to be honest with themselves and really think if they do get a mod will they REALLY be able to afford it long term. The amount of mods that are failing are so high it is disgusting. Those who want and who can afford a mod should pursue it but those who can't should do a Short Sale and move on with their life.

In addition what I mean by "mandating Short Sales" is if a borrower is responsible and makes a good faith effort to avoid foreclosure but does not qualify for a loan mod then the banks should be forced (mandated) to allow borrowers a 6 month period to do a Short Sale before they can foreclose.    Short Sales sell for more than foreclosures and they save the banks thousands of dollars therefore it is in everyone's best interest to do them.

 

I hope that is more clear.

Oct 29, 2010 07:24 AM