Patience Pays Off in Short Sale

The greatest mistake a homeowner can make when faced with the possibility of foreclosure is to think there is no way out. Even if your situation seems hopeless, you will be surprised to learn there is actually an effective solution available. Many distressed homeowners today have managed to avoid a foreclosure by applying for a short sale.

In simple terms, a short sale allows the homeowner to sell the property at an amount less than what is owed on the property, with all the proceeds of the sale going to the mortgage lender. Such transactions obviously require the approval of the lender.

Before the mortgage collapse, short sale transactions were not as popular but, with the decline in home values and the sluggish economy, it has become the go-to- solution for many homeowners hoping to avoid a foreclosure. Even lenders are choosing short sales over foreclosure becuase it means netting a better recovery and avoiding foreclosure-related expenses. In Florida, the cost can skyrocket considering it takes a minimum of 135 days for the judicial foreclosure to be completed.

What a Short Sale Requires

Distressed borrowers who are considering a short sale should understand it will take a lot of patience. For starters, you need to find a short sale Realtor who understands the process and can provide you with expert advice and tips. You need to be patient in providing the necessary documents as well as communicating with the Realtor if you want the property to receive offers.

There is also the “selling” period when you need to find a buyer who is willing to wait for the lender approval. You will have to show your home to potential buyers and be available to answer their inquiries as well.

Of course, negotiating with the lender can be tricky. You should expect the lender to make a counter-offer since they want to recover as much of their investment as they can. It would save time if you do a comparative market analysis to justify your selling amount or your acceptance of the buyer’s offer. In the past couple of months, more and more lenders have been fast-tracking these short sales in order to prevent their inventory of repossessed properties from ballooning.

Once you have the lender approval, there is certainly nowhere else to go but uphill. Everything will fall into place and you can focus on moving on and finding your feet.

Short Sales – The Cheaper Alternative to Foreclosure

Over the past couple of years, the number of short sales has actually tripled and is anticipated to grow even further by 25 percent during the current year. Florida is actually among the states with the highest short sale transactions recorded.

This figure is clearly an indication lenders are looking at short sales as the cheaper alternative to foreclosure. In addition, the clogged courts in states practicing judicial foreclosure means a lender will have to wait a long time before the foreclosure has been processed. In New York, it takes an average of 966 days for a property to be foreclosed.

Major mortgage lenders and servicers have also started to reach out to their borrowers and even offering incentives to consider a short sale instead of a loan modification. Short sale processing and approval has also been shortened, although it is still not as short as many Realtors and distressed homeowners would want it to be.

So why have lenders changed their minds and choosing a short sale over foreclosure? The answer is simple — costs. Proceeding with a foreclosure has become quite expensive. In fact, Wells Fargo incurred around $305 million in foreclosure-related expenses during the 2nd quarter. It is actually less than the  $408 million spent during the 1st quarter.

For Homeowners Considering Short Sales

There is probably no better time than now to consider a short sale especially considering lender and servicer behavior involving short sales has changed dramatically. Here are some simple pointers:

  • Keep in mind the short sale approval will be processed faster if all required documents have been submitted.

  • Do your homework and make sure all figures in your proposal are backed by facts obtained from meticulous research.

  • Expect the lender to come back with a counter-offer. Make sure you are ready to accept, reject or make a counter-offer of your own.

  • Short sale buyers can become impatient and you need to keep constant communication to ease their concern.

  • Working with an experienced short sale Realtor always pays off in the end. His knowledge and skills will surely come in handy.