In April of 2008, I published the following article regarding Short Sales:
I imagine by now, you have heard the term "Short Sale" over and over and over again. Today's real estate market has lots of them. (They are really a pre-foreclosure) Most short sales will become REO's (real estate owned by the bank) as they will not sell and will ultimately go through the foreclosure process.
A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for. The bank must agree to allow the property to be sold for less than the amount owed on it as payment in full.
There are many reasons why a bank might agree to a short sale. Here are a handfull:
- Declining market values.
- Mortgage is in arrears.
- Homeowner has hardships and can no longer afford the payments.
- Bank may have too many REO properties already.
Negotiating with the bank can be a lengthy and complicated process for all parties involved. There are no guarantee's and banks are not obligated to agree to a short sale. A buyer can invest time, money and emotion waiting for a purchase that may never happen and the seller may wind up going through the forclosure process anyway.
Bottom line: Short Sales are not easy and they are not short!
Eight months later, the only thing that has changed is the number of Short Sales currently available on the market! Banks are still not overly anxious to negotiate a short sale and the time involved in the initial process is as frustrating as ever. My advise to my clients is to focus on the REO's (bank owned properties) instead, unless they have plenty of patience, intestinal fortitude and an unlimited supply of Rolaids!
That was then! This is now! (August 2009)
SO...What Has Changed And Why?
According to Bart Marchioni, Certified Foreclosure & Short Sale Specialist, "Banks are in the business of lending money and not owning real estate. If a home is in foreclosure because the borrower is in default, that’s called a non-performing loan. Federal Reserve guidelines state that the bank must put aside two to eight times the amount of the non-performing loan to cover the bad debt. If this money is sitting in reserve, it obviously can’t be loaned out to new customers to make the bank more money. As a matter of fact, there are strict federal guidelines as to how many bad loans a bank can even have on their books at any given time. If a certain percentage of their outstanding loans are considered bad debt, they can be fined, sanctioned and even federally regulated. So you see, they are quite eager to get rid of a property before they have to take it all the way to a Trustee Sale and possibly take it back as an REO (which by the way stands for Real Estate Owned.) Not to mention the fact that the foreclosure process is long and expensive for the lender involved".
Obviously, because of the current state of our housing markets, as well as the number of foreclosures and pre-foreclosures which continue to grow at staggering rates, the banks are beginning to understand that it is generally in their best interest to work with the seller to accommodate a short sale, rather than go through the lengthy and costly foreclosure process.
Short sales are still difficult, frustrating and certainly not short but they are usually much better for the seller as well as the lender.
Short Sales are an option that should be considered when faced with the inevitability of losing your home to the foreclosure process.
As a Broker Associate for RE/MAX Gold, I have an obligation to my profession as well as my clients, to continue my education and stay current on those issues that impact us so heavily. As a Certified Distressed Property Expert (CDPE), my specialized training and compassionate attention to detail, give me a unique ability to guide you through what can be a confusing, difficult and often emotional process.
Should you or any of your family or friends have any questions or find yourselves in similar situations, please don’t hesitate to call me. I can be reached at (209) 370-6233 or go to my website: http://www.gregadamsrealestate.net.
"FREE, NO OBLIGATION & TOTALLY CONFIDENTIAL!"
(See also, "Distressed Property Expert" for additional information)
P.S. ……..As always, I will never be too busy for you or any of your referrals.