Short Sales an Increasingly Attractive Alternative to Foreclosure
A short sales is one of the tools mortgage lenders use in soft real estate markets to deal with the high tide of foreclosures they're experiencing today. When a homeowner with a high mortgage balance gets behind on his loan payments, a lender has a decision to make related to how to handle the default. He can either start foreclosure procedure or try to get the homeowner to sell the property and pay off the loan.
If the owner is willing to sell, chances are the lender will have to settle for a lot less than a full pay-off of the remaining mortgage loan balance. Many lenders today prefer to give the owner a chance to list and sell a home at below market price before the foreclosure auction takes place. A sale at a price that doesn't produce enough to pay off the mortgage loan in full is called a short sale.
Though it seems counterintuitive, lenders are willing to give the go ahead for home sales at prices that won't satisfy the full balance owed on the mortgage. This short sale process provides a lender-approved means of mitigating a lender's losses due to a homeowner's default and subsequent foreclosure on the property.
Why would a lender allow a short sale if it will result in monetary loss for the lender? The lender is trying to lose less than it otherwise would if the home were to go through the actual foreclosure process, since foreclosure itself is extremely expensive for the lender. Foreclosure involves legal fees, loss of interest income, the cost of evicting the homeowner, back property tax balances, plus insurance and real estate commissions. Short sale results in the lender losing less money than it typically would with a lengthy and costly foreclosure proceeding.
Given the high costs of a foreclosure, many lenders actually net more money through short sales than through foreclosing on and reselling properties. In the current foreclosure crisis, lenders have far more REO (repossessed homes) in inventory than they can reasonably handle. This costs lenders time and money while these non-performing assets continue to sit on the books. But the costs of the foreclosure process itself aren't the only concern for lenders.
Lenders are also pressured by city and county governments to keep vacant foreclosure properties in good condition to stave of vandalism and drug related crimes. Some municipalities even file lawsuits against lenders that fail to maintain vacant REO properties in good repair. This risk is another reason why lenders increasingly prefer short sales over foreclosure proceedings.
Many lenders try to get rid of their large inventory of REO homes by making huge price cuts. Still, many lenders have found that owning a large inventory of foreclosure properties is more of a burden than it is worth. This is why lenders are increasingly reluctant to avoid foreclosing on homes if there is any other alternative available. Short sale has become such a widely used option that many lenders now have staff on hand whose job is to negotiate short sale offers submitted on foreclosure properties. Lenders are taking every possible step to avoid adding to the ever-growing burden and expense of owning vacant foreclosure properties.
When you are buying a house through a short sale you have an opportunity to get a property in foreclosure at sizable discount before the foreclosure auction. Keep in mind, the short sale can only happen with the approval from the lender. If you're a real estate investor you can either sell it at profit or you could use a short sale bargain as a rental and enjoy a higher than usual cash flow.
Why would a homeowner entertain an idea of a short sale? Due to current economic crisis many homeowners are finding themselves without steady employment. Without a paycheck families are falling behind on mortgage payments. Many are now facing foreclosure.
For homeowners with few resources to make often high payments on an over-financed home, a short sale is sometimes the only way to easily exit the situation. For investors, a short sale can be a path to a profitable return on the sale of a foreclosure home.
If the owner is willing to sell, chances are the lender will have to settle for a lot less than a full pay-off of the remaining mortgage loan balance. Many lenders today prefer to give the owner a chance to list and sell a home at below market price before the foreclosure auction takes place. A sale at a price that doesn't produce enough to pay off the mortgage loan in full is called a short sale.
Though it seems counterintuitive, lenders are willing to give the go ahead for home sales at prices that won't satisfy the full balance owed on the mortgage. This short sale process provides a lender-approved means of mitigating a lender's losses due to a homeowner's default and subsequent foreclosure on the property.
Why would a lender allow a short sale if it will result in monetary loss for the lender? The lender is trying to lose less than it otherwise would if the home were to go through the actual foreclosure process, since foreclosure itself is extremely expensive for the lender. Foreclosure involves legal fees, loss of interest income, the cost of evicting the homeowner, back property tax balances, plus insurance and real estate commissions. Short sale results in the lender losing less money than it typically would with a lengthy and costly foreclosure proceeding.
Given the high costs of a foreclosure, many lenders actually net more money through short sales than through foreclosing on and reselling properties. In the current foreclosure crisis, lenders have far more REO (repossessed homes) in inventory than they can reasonably handle. This costs lenders time and money while these non-performing assets continue to sit on the books. But the costs of the foreclosure process itself aren't the only concern for lenders.
Lenders are also pressured by city and county governments to keep vacant foreclosure properties in good condition to stave of vandalism and drug related crimes. Some municipalities even file lawsuits against lenders that fail to maintain vacant REO properties in good repair. This risk is another reason why lenders increasingly prefer short sales over foreclosure proceedings.
Many lenders try to get rid of their large inventory of REO homes by making huge price cuts. Still, many lenders have found that owning a large inventory of foreclosure properties is more of a burden than it is worth. This is why lenders are increasingly reluctant to avoid foreclosing on homes if there is any other alternative available. Short sale has become such a widely used option that many lenders now have staff on hand whose job is to negotiate short sale offers submitted on foreclosure properties. Lenders are taking every possible step to avoid adding to the ever-growing burden and expense of owning vacant foreclosure properties.
When you are buying a house through a short sale you have an opportunity to get a property in foreclosure at sizable discount before the foreclosure auction. Keep in mind, the short sale can only happen with the approval from the lender. If you're a real estate investor you can either sell it at profit or you could use a short sale bargain as a rental and enjoy a higher than usual cash flow.
Why would a homeowner entertain an idea of a short sale? Due to current economic crisis many homeowners are finding themselves without steady employment. Without a paycheck families are falling behind on mortgage payments. Many are now facing foreclosure.
For homeowners with few resources to make often high payments on an over-financed home, a short sale is sometimes the only way to easily exit the situation. For investors, a short sale can be a path to a profitable return on the sale of a foreclosure home.
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Yes, you can find short sale opportunities and start submitting multiple short sales packages to banks and negotiating dramatic discounts
posted by Debt Consolidation Loan at
12:08 PM
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