PRE-FORECLOSURES/SHORT SALES
Daily Real Estate News | March 21, 2007
Short Sales Might Help Curb U.S. Housing Slump
A growing number of lenders are approving short sales as an alternative to foreclosure, says Doug Duncan, Mortgage Bankers Association chief economist.
The move is a way for lenders to avoid having to take over and manage property.
The mortgage industry, which ultimately is uninterested in owning properties, is reaching out to troubled borrowers, trying to help them head off delinquencies. The way banks see it, it's better than if the house goes into foreclosure, stands empty, and sees its value spiral downward before it's auctioned on thecourthouse steps," says Duncan, who expects rising delinquencies to spark an increase in pre-foreclosure sales.
Though short sales put additional downward pressure on the national median home price, Fannie Mae chief economist David Berson says they also lower the number of foreclosures and can help ease the housing downturn. Source: Bloomberg, Kathleen Howley (03/21/07)
The number of borrowers whose mortgages are at some point in the foreclosure process has hit the highest level in five years. Short sales are properties were the owner has borrowed more than what the house is worth. The owner usually has refinanced too many times and now is up side down in their house. So instead of going into the long foreclosure process the owner negotiates with the bank that financed their home loan and explain they can wait until the house goes into foreclosure and then the bank would have to wait up to 2 years to get their money back. Or you can take a loss on the loan you financed and let me sell the house at a lower market price to get a quicker sale and the bank gets their money back quicker instead of going through the long drawn out process of foreclosure. These short sales are a great way to get killer deals that are way under market value.
Preforeclosures, or short sales, as they’re sometimes called, are somewhat more complicated. Explains Johnson, “What usually happens is that you negotiate a settlement with the mortgage holder usually a bank to prevent foreclosure.”
A typical settlement is having the house appraised and asking the bank to accept that amount, even if the seller owes more on the mortgage. Most banks agree because it saves time and money by avoiding the foreclosure process. The upside for sellers is that they walk away free and clear with their credit intact.
This article was published on: 02/01/2007 Realtor Online Magazine
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