Posted by: gaylehendersoncdpe | August 28, 2009

Want more Information on Short sales?

We would like to hear your questions regarding short sales.  Here in Arizona, we are experiencing a declining market with more than 65% of each month’s sales this year respresentative of bank owned or short sales (properties sold with the approval of the seller’s lender, for an amount less than the outstanding debt. )  Current market conditions have created a lot of uncertainty, questions and misinformation.  We look forward to your questions on these and related topics.

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Responses

  1. I found your information on your site regarding the Short Sale Process informative. However…I have one major question: Why does the home owner have to be in hardship situation? With the market today and property values in most areas still moving downward, homes that were purchased at the beginning of the year are heading downward in value due to the contiuation of foreclosures. You pointed out the expense that the lender goes through on a Foreclosed property and the pit falls to the owner (defeciency balance). Shouldn’t a homeowner who is still able to pay the mortgage but the property is so underwater in value it will never reach the original purchase price during the term of the loan or longer be able to request a short sale and keep his financial and credit worthiness in tact?
    Example: Young man purchased a condo conversion in 2007 $130,000 only 1/3 of the project sold. The developer sold the community and the new owner is renting the other 2/3 of the community and a good portion of the condo conversions that were purchase have foreclosed and sold for $28,000. He still owes 129,000. Why should he have to go delinquent to qualify for a possible Short Sale and most likely suffer Foreclosue? It seems that the market would change to an upward swing and stablize or possibly increase property values if the homeowner who is honoring contract but will never have a way out of his home to be able to short sale his property. Fannie Mae will allow a homeowner who completes a short sale and obtains the proper documentation to purchase as soon as the short sale is completed as long as the owner has never been 60,90,120 or 180+ on their mortgage. Doesn’t this tell us something?

    • Maureen,

      Thank you for your thoughtful discussion regarding short sales. Remember, a lender has no obligation to modify a loan, refinance, or approve a short sale. In each of these scenarios, the lender is taking a positive step on behalf of the borrower to keep him from foreclosure. Simply having a property, that is worth less than when it was purchased, is not a reason to motivate a lender to modify a loan or to approve a sale of that home for less than the debt; especially if the home owner is financially able to keep up his payments. For now, this may not be something that makes an owner happy, but in time our property values will correct and begin to appreciate again as they have in many parts of the country. Don’t lose sight of the fact that an imminent foreclosure is what the lender wants to help the home owner avoid. As far as forcing someone to go delinquent in order to do a short sale. that is something we never recommend. In fact I have had several home owners recently who have had short sales approved while they were still current with their payments, and never went delinquent. So why did the lender approve the short sale ? The financial crisis was imminent. The hardship could be a forced relocation to keep employment while unable to sell or rent the home to cover payments. A medical crisis, or a notice of employment lay-off within the next six months are all part of an individual’s personal story which would lead a lender to approve a short sale, even if the borrower was not delinquent. The bottom line is that if you can stay in your home, financially, you should try to do so. If you can modify your loan so that is possible, we support that, but if financial disaster is right around the corner, the short sale might be your best alternative.


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