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Why Would a Lender Accept a Strategic Short Sale?

Reblogger Jessica Sulliman
Real Estate Agent with Garrette Custom Homes SA537042000

This "Strategic Short Sale" example is indicative of a majority of the short sales going on in the metro Phoenix area.  Homeowners, in most cases, owe at least DOUBLE what their homes are worth, EVEN if they put money down. In some cases, they are TRIPLE or QUADRUPLE over levereged. It really puts a new spin on the whole morality issue of walking away. 

Original content by Bryant Tutas BK607690

Tutas Towne Realty, Inc

Hi folks. Judy Chapman wrote a very good article titled  "To do a strategic short sale or not to do a strategic short sale ... that is the question". 

If you haven't read Judy's post please take a minute to do so.

A couple of her readers didn't understand why a Lender would even consider a Strategic Short Sale. This article may help answer that question.

A Strategic Short Sale is a choice. It's a choice made by a seller (borrower) to sell their property to get out from under a mortgage that no longer makes sense and put their money elsewhere. These borrowers do not have a "normal" hardship.

Here's an real life case of a Strategic Short Sale situation:

I have as young family right now who bought their house in 2005. They paid $250,000 and put 20% down. They purchased using an ARM because the mortgage broker convinced then that in 3 years they could refinance into a fixed rate. This 3 year period was the amount of time the husband needed to complete his internship with his job and go into a higher salary.

Before they could refinance the bottom dropped out of the market. Their mortgage went up from $1,500 a month to almost $2,500 a month. Their home is now worth $55,000.

Anyone that reads this and thinks these folks should just stay and honor their obligation is just flat out wrong. And folks that "think" they would stay, if in the same situation, are just kidding themselves. There's not a Lender on the planet that would modify this loan so that it works.

So this family can stay  trapped in their home for the next 25 years or they can sell now and move on with their lives. It's a no brainier. By the way, we are closing on this Strategic Short Sale in 2 weeks.

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But why would a Lender accept this Strategic Short Sale? Because they know that it is inevitable that this loan will go into default or have to be settled at some time in the near future. On average folks in the US have to move and sell every 5-7 years. This loan will still be way underwater at that time. So why not just take the loss now?

A Strategic Short Sale almost always requires the borrower to participate in the Lender's loss. What this means is the borrower will be required to make a cash contribution at closing and/or sign a new promissory note paying back some of the money owed over time.

A Strategic Short Sale is a settlement. It's the Lender agreeing to a lump sum of money now instead of continuing to accept payments over the existing life of the loan. 

Never forget the time value of money.

Simpler explanation: You owe me $100. You have agreed to pay me $1 a month for the next 100 months. You come to me an offer me $45 today to wipe out your debt. I agree. Is that $45 today worth more to me than the $1 a month for the next 100 months? Probably. I can't predict the future so cash in the hand is a safer bet. Plus I can now re-lend the money and get it working for me again. Plus I received some money from the mortgage insurance company and the government for taking the "loss". It only looks like a bad deal on the surface.

Things aren't always what they seem. Make cents?

 

Are you facing foreclosure in Florida?

 

Contact Bryant Tutas

Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.

Want to find out more? www.CentralFloridaShortSales.com

***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

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Copyright © 2011 http://www.brokerbryant.com/ | All Rights Reserved

 

Mortgage Assistance Relief Services Disclosure

Tutas Towne Realty, Inc is not associated with the government and our services have not been approved by the government or your Lender. If you stop paying your mortgage you could lose your home and damage your credit. Your Lender may not agree to the change of your loan and/or a Short Sale.With a Short Sale, there are no guarantees offered and we cannot provide legal advice. Seek legal advice.
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Tutas Towne Realty, Inc handles Florida real estate sales, Florida short sales, Florida strategic short sales, Florida pre-foreclosure sales, Florida foreclosures in Kissimmee Florida, Davenport Florida, Haines City Florida, Poinciana Florida, Solivita Florida, Orlando Florida, Celebration Florida, Winderemere Florida. Serving all of Polk, Osceola and Orange Counties Florida. Florida Short Sale Broker. Short Sale Florida.

 

 

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Don't let time slip away. Take action today.  Foreclosure is NOT an option!
Call Jessica Sulliman Phoenix Arizona Short Sale Agent for a confidential phone interview to go over your options to avoid foreclosure at 602-677-7977. 

Stop Foreclosure- Learn Your Options. Maybe a short sale is your best option. 

Maybe the bank will PAY YOU to short sell your home! We may be able to help you avoid foreclosure.

 

IMPORTANT DISCLOSURE:
*Seek competent legal counsel and tax advice for any real estate transaction. Jessica Sulliman and Ashby Realty Group are not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit. Your Lender may not agree to the change of your loan and/or a Short Sale.With a Short Sale, there are no guarantees offered and we cannot provide legal advice. Seek legal advice.*

About the Author...

This article  was provided by Jessica Sulliman, a Nationally recognized Realtor and Certified Short Sale & REO Specialist.  Jessica can be reached via e-mail at azshortsalediva@gmail.com or by cell phone or text message at 602-677-7977. Jessica has helped hundreds of people buy and sell their home.  For Arizona real estate and homes see www.jessicasulliman.ashbyrealty.com or www.theshortsalediva.com

Ashby Realty Group handles Arizona real estate sales, Arizona short sales, Arizona strategic short sales, Arizona pre-foreclosure sales, and Arizona foreclosures in the entire metro Phoenix area.  We specialize in the East Valley: Queen Creek, Gilbert, Chandler, Mesa, Scottsdale, Paradise Valley, Apache Junction, Gold Canyon, Tempe, Florence, San Tan Valley,  Ahwatukee, Anthem at Merrill Ranch resort community in Florence AZ. Serving all of Maricopa and Pinal counties Arizona. Arizona Short Sale Realtor. Short Sale Arizona 

Copyright © 2011 http://www.theshortsalediva.com  | All Rights Reserved

Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Jessica, thanks for reblogging. In a strategic short sale the borrower will be asked to contribute. Many short sale sellers have the mind that if they are short selling, they are losing, and don't want to have to contribute anything to their lender. If a strategic short sale, sellers need to know and be prepared they will be asked for a contribution. If they're not willing to contribute, don't take the time that's involved.

Apr 23, 2011 07:09 PM