Banks re-think their position on Short Sales vs. Foreclosures to deal with the rising number of defaults. This news may affect you or somebody you know. Read on...
The South Florida real estate market is dismal. Often homeowners find themselves in an uneasy spot. The bills pile up while the value of their homes keeps falling. Large sums of money are owed with few possibilities for repayment, and the stress and anxiety endured by the borrower are tremendous. At some point the banks step in and want their money. There are no happy endings here.
Of the many choices for the borrower and the lender, Foreclosures and Short Sale stand out. In Foreclosure the bank repossess the property, evict the home owner, and assume all the expenses, damages and vandalism etc. and must carry the property until a new buyer appears. This is a lengthy process in which everybody loses. The borrower's credit rating tanks and the banks are out the money owed, while also picking up these new expenses.
In a Short Sale an agreement is negotiated between owner and lender to quickly offer the property for sale at a fair market price, but less than the amount owed. The borrower prepares a detailed package of documents outlining the reasons for “Hardship” and the Short Sale request. If the bank accepts, the owner may be released from some or all the money owed, benefit from “Relocation Assistance” and the bank cuts its losses. The short sale can be done in as little as 90 days and the borrower's credit rating takes a way lesser hit than either Foreclosure, Deed in Lieu or Bankruptcy while not being destroyed.
As you can see, it's not a total win/win situation; however, a Short Sale can make a bad situation way better for the homeowner and the lender/investor. And it seems to be where the banking community is heading today.
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