Why let a property foreclose when one can try a short sale instead?

By
Real Estate Agent with Alain Pinel BRE 01367196
https://activerain.com/droplet/PvY

Why do people let properties foreclose when they could have sold as a short sale instead?

Perhaps we should revisit this article from REALTOR.com

Choosing a Short Sale Over a Foreclosure


Alameda CA remains as a very popular and sought-after place to live. Although the property values also suffered during the crash, we are now seeing signs of recovery, judging from the multiple offers and overbidding lately.Successful short sale

What surprises me is when people had a chance to do short sales, but didn’t, and ended up being foreclosed.

In the last few years, I met with some property owners and proposed to them to attempt a short sale. Some of them already received a Notice of Trustee Sale by the time they called me, but I was able to get them in contract and get the short sale approved. Those are the success stories.

But then there are those who didn’t.Foreclosed home in Bayport

I saw a beautiful property in desirable neighborhoord of Bayport,  listed as bank-owned. When I checked the history, it turned out that it was owned by a Realtor. Really?

Then there’s a family of 7 whom I helped buy their dream house. Later, they fell on hard times. The parents were on the brink of having a third party help them get their loan modified when they pulled out, and said they will try to do it themselves. When I saw that they were terribly behind their payments and that they already received a Notice of Default I asked if they would consider a short sale. They said absolutely not.  That property foreclosed.

An investor I know was actively buying and renovating fixers. One of his properties showed up as being delinquent. So I asked him if he had considered a short sale. He said he was getting his loan modified. Today, I read that it was just foreclosed.


Why?

Since the Mortgage Debt Forgiveness Act was just renewed (California's state legislature hasn't yet on the state level), it seems we should redouble efforts to guide people on their options besides letting the properties foreclose.




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Rainmaker
1,037,066
Mark Loewenberg
KW of the Palm Beaches - Palm Beach Gardens, FL
KW 561-214-0370

edumacation for the most part.  had one in my neighborhood that went through the process and I had spoke with the foks a few times, but they just let it happen to them : (

Jan 18, 2013 04:58 AM #1
Rainmaker
710,608
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Mark --

Sad, isn't it? I was aghast that a realtor and a seasoned investor wouldn't attempt the short sale.

 

Jan 18, 2013 05:31 AM #2
Ambassador
3,090,260
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

I don't think that our industry really understands that the Mortgage Debt Forgiveness applies to Short Sales AND Foreclosures, but it is still preferrable in terms of credit report hit to do a Short Sale.  There is also more control over what amount is forgiven.  As it was explained to me, a foreclosure gets 1099-ed too...just AFTER it's been resold at a price that the bank set and who knows how far into the future.  Take advantage of the control of a Short Sale in being able to set the list price, negotiate the offer with the buyer and then talk to the bank about other terms of the approval.  It's much more desirable to be in control.

Jan 18, 2013 09:32 AM #3
Rainmaker
710,608
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Chris Ann

And in our state, our governor has also enacted a bill that short sale lenders cannot go after short sale sellers after the sale is concluded. That applies to junior lien holders as well. All the more reason for California distressed sellers should look at all their options.

http://www.reuters.com/article/2011/07/15/idUS203138+15-Jul-2011+BW20110715

Jan 18, 2013 12:19 PM #4
Rainmaker
3,252,225
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Lack of education....frozen in fear....misinformation....it is beyond us why everyone would not choose a short sale every time.

Jan 18, 2013 10:31 PM #5
Rainmaker
407,763
Cameron Novak
The Homefinding Center - Corona, CA
Featured Corona Real Estate Agent Team

Nicely done Pacita.  In the absense of tax liabilities, short sale is definitely a smart move in most circumstances.
Cameron in Corona

Jan 21, 2013 02:41 PM #6
Rainmaker
1,304,425
Charles Stallions Property Manager
Charles Stallions Real Estate Services - Pace, FL
Pensacola, Pace & Gulf Breeze Property Management

So much uncertainty as well as the media and it's portrayal of the short sale.

Jan 22, 2013 11:58 AM #7
Rainmaker
710,608
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Sally and David -- one would think that as we have more and more short sales hit the mrket that people will be more inclined to try out this option.

Cameron --- Steve Harney has a terrific blog like this one http://www.kcmblog.com/2012/05/09/short-sale-vs-foreclosure-10-common-myths-busted/

Charles --- the sad part is some folks such as laymen, neighbors, relatives with no short sale experience would give others advice.

 

 

Jan 23, 2013 03:06 PM #8
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Rainmaker
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Pacita Dimacali

Alameda/Contra Costa Counties CA
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