Wednesday, July 25, 2007

Short Sales ... Quick are They?

All this talk about short sales … how quick are they?

The name “short sale” doesn’t reference the time involved, rather it describes the situation when a lender or bank agrees to accept less for the property than is actually owed on the mortgage. It is a realistic phenomenon in real estate markets such as we find ourselves in today. The majority of the prospective short sale properties today involve, in one way or another, a high purchase price or refinance done in 2005, an adjustable rate mortgage that is adjusting to normal from the teaser rates, or a high loan to value, i.e.- 100-125%, sub-prime loan. Any one of those items can create difficulties, two or more leads to sleepless nights.

Public myth to the contrary, the lenders don’t want to own the properties they loan on - they want their payments. If payments stop coming they have the option to foreclose. In a market that has declined they are faced with a difficult choice – take back the property, or settle for less than what is owed. Taking less than what is owed and avoiding the foreclosure process, with its many uncertainties and delays, is now seriously considered more than ever before. Some lenders have established departments for just this process – an unthinkable idea just a few years back.

A lender looks at many things when considering a short sale. Some are obvious like whether or not the homeowner is deserving of a short sale. Do they make a substantial amount of “verified” income? Do they have equity in other real estate? Is it in the bank’s best interest to take a short sale or repossess the house and sell through a Realtor? How many properties does the lender have in default? How flexible is the investor backing the loan? Is there a third party servicing the loan? Are there stipulations within the mortgage note or mortgage insurance precluding selling short? Is the property owner’s cause for default/foreclosure justified? There are other “secrets” that are known by trained short sale agents that are used to determine the feasibility of successfully executing a short sale.

Our Advice: If your payments are a struggle, or just aren’t happening, don’t deny the reality of the situation. Take action. If you wait too long you may have no option but to experience a foreclosure, or to delay the inevitable with a bankruptcy filing. If you take action you might very well get yourself out of your situation sooner, save the mental/physical wear and tear on you and your family, and incur less of a credit ding than the other options. Don’t prejudge what you think will happen – you might be very surprised at what can really happen for you. Find out the truth about your specific situation and you will have the ability to implement an action plan.

A lot of people are talking about short sales – deal with those in the know to get your situation properly resolved. Some are going to classes, getting educated to help the public. Check with your agent for guidance, or find one that is short sale knowledgeable. Short sales are a tool, but there can be unexpected consequences and they aren’t for everybody. This is but a moment in time and time will heal this … if you act now. When it comes to choosing professionals to assist you with your real estate needs… Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates,, 775-781-5472.

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