Short Sales: A Way To Avoid Foreclosure
It’s no secret the housing market it in a bit of a slump lately. More people are finding themselves owing more on their mortgages then their houses are worth at the moment. And because of that business is booming for one particular type of real estate transaction.
It’s been called a buyer’s market, and that’s not good for anyone needing to sell their home quickly. It’s especially bad for those trying to get out from under a mortgage they can no longer afford. And, it’s why some real estate agents are learning the ins and outs of “short sales”.
“The agents that I know that are specializing in this are doing great business. Unfortunately,” said Brad Anderson, a mortgage broker who helps a lot of agents negotiate short sales with banks.
For example, someone has a mortgage balance of $300,000, but in today’s market the home is only worth $250,000. That leaves the owner upside-down by at least $50,000.
An agent can pitch a short sale, convincing the bank to forgive part of the loan so they can put it into play in the current market.
“They can contact that lender, ask the lender to accept a lower value or mortgage balance, and pay that loan off so they can get that house sold,” said Anderson.
For people no longer able to make the payments on their homes, a short sale can keep them from just walking away on the loan, and ruining their credit in the process. It’s not like you will walk away with clean credit, but it’s better than a foreclosure.
“A foreclosure will hurt your credit record for about five to seven years. You can recover from a short sale in one to two years,” said Anderson.
However, Anderson points out that lenders just don’t give up money. There has to be a legitimate reason why it’s likely the only option of getting any money out of loan.
“Divorce, loss of job, illness. They’re the same reasons that people have always historically had a problem making their payments,” he said. “It’s just now we’ve given them so much less room to work on it because they’re values are lower.”
And it’s not like anyone who’s upside-down on a house can sell in a short sale. But in a market with plenty of homes for sale, banks don’t want to own too many.
Foreclosures aren’t good for anyone, including lenders.
“Foreclosure expenses are dramatic. The numbers that we hear are anywhere from $60,000 to $80,000,” said Anderson.
A short sale isn’t the ideal way to move a home, but in a so-called buyers market, for some sellers, it’s the best way.
“It’s a situation where a lender is going to look at that and say, for the good of everyone involved, we need to get this house on the market, and get this out of your hair and out of our hair as quickly as possible,” said Anderson