Lenders Favor Short Sales

Why would lenders ever prefer to take less for a property than what they are, technically, owed on it? That is actually a very good question and one that makes the concept of the “short sale” sound like one of those “too good to be true” options. However, more and more lenders are agreeing to this way of selling a home.

So, why are they doing it? There are several extremely valid reasons that take only a second to recognize and understand:

  • Homeowners are often current with the mortgage(s) even when negotiating a short sale. This keeps things going smoothly and allows the property to be kept in good condition even as the lender gets more and more of their capital back from the borrower.
  • The sale of the property is being managed by others. This saves the bank time that would have to be dedicated to selling the property if it were foreclosed on in the future.
  • Short sales end up being less expensive than foreclosures. Think about it; a foreclosure means the bank now has the property to maintain, plus they have to do the marketing needed to sell it. They may need to heat the space or have electrical service, and all of this adds up. It could be more cost effective to take less cash from a short sale.
  • A foreclosure represents a distressed property, and this is just another weight that the bank has to carry. Short sales are not kept “on the books” in the same way, and everything is still on the owner until the sale occurs.
  • Some money is better than none, and in some cases the original owner is still held liable for the deficiency between the sale price and the mortgage. In other words, if the deal is negotiated by the bank in this way, they may not lose out at all.

Of course, short sales do represent a healthier “way out” for the owners. And though they do translate to a bit of a black mark on the credit report, the short sale is far less destructive than a foreclosure. After all, if the owner remains current on the mortgage until the short sale is recorded, it can lead to a clear record in as little as two to four years time. However, a foreclosure stays with the borrower for at least seven years, preventing them from getting another mortgage, but also usually blocking them from credit of almost any other kind.

The key, many say, is to not attempt to negotiate a short sale on your own. It is not a “DIY” project. Instead, the best outcome for a buyer or seller is to find a real estate professional with a lot of background in short sales. They will be able to understand the client’s needs and know how to get the best response from lenders.

Tags: , , , , , ,

You must be logged in to post a comment.