In the current Tucson real estate market there are an abundance of short sales and foreclosures. The most common reasons that homeowners are going into foreclosure is that they bought the home a few years ago, and then the market went up dramatically, so during that time they refinanced their home. Then the so-called bubble burst and prices started to drop. So, now the homeowner owes more for the home than it is worth, and some things happen were they can't pay the mortgage. A short sale is when the owner of a property sells it for less than they owe with bank approval. A seller can also have a short sale, even if they have never missed a payment but the property is worth less than the mortgage amount. However, I have heard that most banks will not consider a short sale unless the owner is behind on their payments, not to say you should stop making payments just be aware of that.
There are a few options when someone is behind on their payments:
- Talk to the mortgage company to see if they can restructure the loan or do something to help the owner.
- Have a company like Hope Now negotiate with the mortgage company for you, I don't believe they charge anything they just want to help.
- Put your house on the market with a Realtor®, if you have a lot of equity, it probably will not be a short sale.
- Whatever you do, don't do nothing, which is a sure-fire way to loose your house and ruin your credit for at least 7 years.
If the owner chooses to list their property it is very important that the listing agent is short sales expert, many are not. There are just so many extra things that a listing agent has to do and know that it is very important that they know what they are doing. The agent should contact the bank immediately to let them know that they are representing the owner, normally the bank wants something in writing proving that, and then they have to find the right person to talk to. Sometimes finding the right person to talk to in the Loss mitigation department can take weeks, so the agent should do this part before they even have a contract to save everyone's time.
After getting a contract for an amount that is less than what the owner/seller owes, the owner or their real estate agent have to talk to the mortgage company to see if the mortgage company will take less than they are owed. Most of the time they will, it is just tricky sometimes to figure out how much less the mortgage company will accept. Most banks and mortgage companies do not want to take back a house because that will be added costs for them and then they have to put it up for sale and hope it sells, which all costs time and money.
If you think you want to buy a short sale you have to be flexible on time, because it may take the mortgage company weeks or months to approve your contract, and they will most likely not make any repairs on the property. Once again it is important that your buyers agent understands short sales and what has to be done in order for the transaction to close. If you want to buy a foreclosure, the process is usually not as long, and you can usually get a good price, but again most foreclosures are "AS-IS", and the bank has no knowledge of the property, it is just a file to them.
Any other Questions feel free to contact me!
Certified Foreclosure, Short Sale and REO Specialist