Short Sales Are More Prevalent Today – by Ashley Leigh

25 06 2010

Today’s real estate market, both nationwide as well in our community, is facing challenges of an unprecedented nature.  Economic forces have piled up to bring a “perfect storm” to our community.

The mortgage industry calamity has caused a massive decline in buyers.  A weakening national economy has dragged consumer confidence down to levels not seen in over 15 years.  Both of those factors are having a significant impact on housing prices.

Now, loan values are too close to or in excess of a house’s market value.

None of these events are new to you.  Turn on your TV, read your newspaper, or listen to talk radio.  Too much commentary is focusing on the calamity side of the situation.  (That, too, contributes to the problem).

However, what is new is the way in which I am helping homeowners who might find themselves in this situation.  In past times, sellers put their homes on the market for the following reasons:

  • Additions to their family
  • Job change
  • Death
  • Divorce

 

Today, there is one more factor: unable to make the loan payments.

Therefore, today’s sellers need the following assistance:

  • Fair market value assessment
  • Marketing
  • Negotiating
  • Short sale expertise
  • Legal advice

 

Few real estate agents are prepared to provide all of those services.  I am, however.

Not only have I closed a number of short sales, I am actively engaged in helping many local home owners who are in a short sale situation.  Importantly, I have added an extremely competent attorney to my team to make sure sellers have legal council to represent their legal interests when discussing the matter with the lender.  Failure to involve an experienced and knowledgeable attorney would be full-hearty and unconscionable.

Let me make sure you understand the terminology that is now part of our real estate market.  Here are some of the more commonly asked questions I am asked.

What is a “Short Sale”?

A short sale is an “arrangement” between the current owner of a home and the bank that lent them the money to buy their home to accept an offer for less than the total amount owed to pay off the home. The “deficiency” is the difference between the amount owed and what the bank collects at the short sale.

Why would a lender even consider a “short sale”?

The simple truth is this: It is much more expensive and time consuming for the bank to pursue a foreclosure.   In actuality, the bank loses less in a short sale than in a foreclosure.

Is a missed payment required to do a short sale?

No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment. Importantly, if a homeowner recognizes a financial shortage is likely, beginning the process even before there is an offer is usually the best course of action.

If a lender accepts a short sale, will the home owner still owe the lender?

Unfortunately, I can not answer this question with a simple Yes or No.  This is the one area where the attorney is critically important.  There are many additional factors that the lender considers with regard to the shortage.  The truth is that the lender will do anything and everything to collect the full amount due.  Legal representation is essential.  However, in many cases the time and expense of pursuing any short fall out-weights the total dollars collected.

How does a short sale affect a person’s credit?

It is the lesser of this bad-news scenario.  Think of a short sale as damage control.  By selling the home prior to an official foreclosure proceeding, the home owner avoids the very damaging FORECLOSURE on their credit report.  That notice stays on the credit report for 7 years.  With a short sale, while repairing credit is not a quick, easy process, it is possible. 

Call me to discuss any other questions you may have.  I’m here to help!

Once the decision is made to pursue a short sale scenario, I have a proven process.  The initial activities involve the following:

  • Preparation of a ‘hardship letter’
  • Proof of hardship
  • Copies of current year and past year tax returns
  • Copies of most recent two months bank statements
  • Copies of most recent pay stub or profit & loss statement for self-employed persons
  • Set up an appointment with the attorney
  • Get the house on the market at a compelling price

 

Call me today for more details.  I understand this is a stressful time, and I want you to know that I am here for you.  Whether it is questions pertinent to your transaction, or simply that you need to vent some of the stress often associated with these difficult situations, I am here for you.

It is very important to remember that you are not alone! You are not the first to go this.  Unfortunately you certainly will not be the last.

Importantly, please do not delay.  Once you recognize the truth, act on it sooner rather than later.  I can help more the earlier you bring me and my team into the picture.

Call me today!

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