Needing a Short Sale is no longer an uncommon situation and definitely not one that is whispered about in today’s housing market. In fact, from the period of 2008 through 2012; the average housing market contained about 40% – 60% short sale or foreclosed homes. That’s A LOT of home owners who couldn’t afford the monthly mortgage AND a lot of homes that lost tons of VALUE. The upside down homeowner IS faced with deciding among a few options:
-Have lender foreclose on the home. Essentially, having the bank take the home back and auction it off to the highest bidder
-Give the home back in a Deed In Lieu (DIL). A DIL was a milder form of a Foreclosure. At one point it was called “Cash for Keys” where the bank gave an incentive to the homeowner to keep ensure the home was in good turnkey condition once the bank took the home back. That program soon went away.
-Try and get a Loan Modification. This was abandoned by many disillusioned homeowners after they realized that a Loan Mod didn’t significantly reduce their monthly payment and definitely for most did NOT change the overall Principle balance.
-Try and Short Sale a property. The home is sold for less than the amount owed but in the course of the sale, the homeowner could remain in their home until either sold or foreclosed if a successful short sale was not obtainable.
No Two Short Sales Are Alike! In the 10+ years of Real Estate, what I discovered is that an intimate knowledge of how the Lender and the Investor (the party that OWNS your loan) works is invaluable to the success of a short sale. A Lender is more willing to work with an Agent who can understand and provide them with what they need UPFRONT. Because I work so many short sales, I’ve also been able to find discrepancies and issues that I’ve been able to overcome through presenting arguments that uses the Federal rules and the Industry/Lender’s own rules. It’s actually a wonderful experience when I am able to be proven right or find a solution that the Lender will need to accept that they themselves did not offer up.
A Lender looks at the benefit of selling the home versus foreclosing. A Lender’s analysis of whether a short sale is warranted depends on reasons for why the homeowner can’t afford to stay in the mortgage. They look at the recovery (Net Proceeds) of the sale to determine the most they can recoup from a Short Sale and whether the homeowner can show just proof that their financial situation warrants an approval. In other words – it is about the Homeowner’s financial hardship and the bank’s financial recovery.
The rules are that a short sale must be sold through a Real Estate agent and must be “Arms Length” (more details in later Blogs about Arms Length). In completing more than 100 short sales by myself with a 97% success rate (NO TEAM, NO OTHER PARTY); what I find to be extremely important is understanding the basic review processes that lenders and the institutions that own the home loan. It is also important to be able to fight for the homeowner when a Lender is proposing recommendations that either are not applicable or may not be attainable by the homeowner. Lastly, communication with the Lender extremely key. Understanding what a Lender needs and translating that to all parties (Seller, Buyer, Escrow Officer and other Lien holders) or debating that need as unreasonable is something that only comes with experience and knowledge.
While not every file is the same or the outcome is something that may be acceptable to everyone, providing the highest standards and working to give the homeowner the best outcome is what I always strive to do. It’s about my Client at the end of the day.