Distressed sales – foreclosures and short sales – still make up about 40% of the local southeastern Michigan real estate market sales (higher in a few of the markets that I track and lower in others). Of that 40% the majority in this area are still foreclosures, with short sales tending to be prevalent in the lower end of mid-range of the market – the $100K to $300K segment – right now.
Short Sales occur when a homeowner sells his/her home for less than what is owed to the bank on the mortgage balance. Bringing money to closing is one obvious way to deal with the situation, albeit not a very popular way. A homeowner who makes up the difference themselves by bringing money to the closing table is selling short, but it is not recorded as a short sale, since the bank got what it was owed. In the sales that are officially reported as a “Short Sale” in the local Multi-list Service, the bank has agreed to take less than the amount owed on the mortgage. There are credit implications to an official short sale, as well as many other possible implications. You can read more about those implications at my web site www.mishortsales.com .
A recent article on the RealtyTimes web site focused upon short sales and had links to two good short sale readings – one posted by the National Association of Exclusive Homebuyer Agents on the “51 Critical things that you need to know about short sales” and the other a pointer to the web site of a homeowner who when through a couple of short sales herself and decided to write a book about it. You can buy the eBook on that site. Go to http://realtytimes.com/rtpages/20120809_shortsales.htm to read the Realty Times article or you can just access the links below.
Reports 51 Critical things you need to know about short sales (a sizable PDF file of 16 pages) -
http://www.exclusivebuyeragentsblog.com/wp-content/uploads/2012/06/20120621NAEBAShortSaleReport.pdf
and
The web site for the lady who wrote a book about her experiences with short sales -
http://www.ahomeownersguidetoshortsales.com/
As I emphasize on my short sale web site, no one really likes having to do these short sales. Short sales are generally better, in terms of credit impact, than foreclosures or declaring bankruptcy; but, they are often frustrating for all of the parties involved. The most apparent “winner” in these transactions is the buyer of the short sale house; although the frustrations and long waiting periods involved can certainly dull the thrill of that victory. Short sale buyers may also be passing up the opportunities on other homes while they wait; thought many continue to “shop” while they are awaiting an answer.
Statistically, the majority of short sales actually fail to close. Many don’t happen because the lenders often pursue the foreclosure process in parallel with the short sale process and the foreclosure happened first. You might think that the bank’s foreclosure department would know that the short sale department is pursuing a sale, but you would be wrong – most banks are so silo-ed in their organizational structure that those two departments almost never talk to each other. During the process it is not unusual for owners to get two letters from the lender the same day or week – one from the short-sale department of the lender and the other from the foreclosure side of the house.
Low appraisals also contribute to the failure of many short sales, which generally means that the sale price, even if set below what is owed to the bank still does not reflect the value that has been lost in the current recession. Some are also lost because the would-be buyers have grabbed a little too far for the brass ring and can’t really afford it once their “mortgage pre-approval” gets to the underwriters.
For owners the goal is a full release of the loan obligation of the mortgage and any future recourse by the lender. In between replies from the lender that range from “No” we won’t do it to a full and complete release of the obligation to the lender is an array of options that the lender might pursue, some of them almost as onerous as a foreclosure might have been. That’s one reason why sellers need the assistance of a short sale real estate team to help with the negotiations.
So, if you are contemplating doing a short sale in the southeastern corner of Michigan read these items and/or go to my web site – www.mishortsales.com for even more on the process and possible outcomes and consequences. Then give me a call and we’ll discuss whether a short sale may be right for you and your circumstances. If you are a buyer who believes that a short sale provides you with the best opportunity to get the most house for your money, call me and let’s discuss what’s involved in the process of buying a short sale house and whether it’s right for you.
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