I started writing a post on short sales, and as I began typing, I realized it might be better coming from the perspective of a Rhode Island lender.
Nancy Rosedale of Shamrock Financial was kind enough to put together this great guest post. I think you'll find it useful.
For most of us, the concept of a "short sale" is relatively new. However, in the aftermath of the recent Credit Crunch and Mortgage Crisis, short sales are exceptionally common in all markets. By definition, when a lender agrees to accept less than what is owed on a property by the mortgagor, the lender has effectively completed a ‘short sale’.
In Rhode Island and other pockets of the United States, we are beginning to see a hint of recovery in real estate sales! Short sales and the purchase of foreclosed properties are almost certainly a contributing factor, as there are endless opportunities for buyers to purchase bigger, more valuable, desirable homes for less! It is important when considering purchasing a short sale to educate yourself as to the process and to work with an experienced real estate agent and attorney who can help navigate through what can sometimes be murky waters.
Why are banks doing so many short sales? Statistics prove that Lenders would rather choose partial recovery than to foreclose. On average, it has been shown that a foreclosed property costs a lender anywhere between $50-100K. It is often mentioned that lenders are not in the real estate sales industry and truly do not want another property in their portfolio. Each foreclosed/abandoned property needs to be secured and boarded, insured, taxes paid current, landscaping maintained, winterized, and ultimately listed with a realtor for sale. These are all expenses that the lender must incur in addition to taking a loss on the unpaid mortgage. Abandoned properties are also commonly broken into and vandalized, costing the lender additional funds or reducing the value even further.
While these transactions may be time consuming (on average, anywhere from 2-6 months), Short Sales can indeed be a win-win situation for all parties included: buyers, sellers, lenders. Buyers have the ability to purchase real estate often at a deep discount at historically low interest rates. In today’s marketplace, there is a surplus of inventory and plenty of ‘discounts’ to choose from! Short sale properties typically are occupied by the sellers up until the closing date, which is important since it provides some peace of mind that the mechanical/structural systems are fully functioning and the home is habitable. On the other hand, sellers are relieved of a debt that they are unable to pay, for one reason or another, and allowed to move on with their lives. And while the lender is potentially taking a large financial loss, the bad loan is written off their books and the collateral is sold and the loss partially recovered by the new sale. A short sale also relieves the lender from having to maintain, secure, and sell the property down the line, which saves hundreds of thousands of dollars.
It is important to keep in mind that while short sales are quite prevalent in today’s marketplace, there is no guarantee that a mortgage holder or lien holder will approve a proposed short sale. A concise, organized hardship package will undoubtedly go to the top of the pile, however. Short Sale negotiators are inundated across the country with submissions and naturally, will defer requests that are incomplete or inconclusive.
Nancy has some great tips on putting together a short sale quickly and successfully. Contact me if you are interested in receiving these tips by email.
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Bob Black
REALTOR
Williams & Stuart Real Estate
870 Oaklawn Ave
Cranston, RI, 02920 |
Work: 401.942.0200 ext 28
Mobile: 401.261.1599
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Your Friend in Rhode Island Real Estate
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