A large part of chasing short sales is educating the homeowners and serving as a type of consultant helping them understand the process. Many homeowners in default have never heard of a short sale and will rely on you to walk them through the process.
Below is an interesting twist to the short sale process. This doesn’t mean all lenders are taking this approach but it is something you need to consider when dealing with homeowners and lenders. Find out if the homeowner is willing to do the deal even if they are going to have some ongoing responsibility with the balance due. Don’t be turned away if they are not as you can still submit an offer to the bank for their review. At the end of the day the bank does not want the property back and there is always the chance they will accept your offer – but you have to make it.
Banks: No Exceptions for Short Sales
Increasingly, sellers seeking short sales are encountering a new twist.
Lenders are agreeing to let some short sales go through, but they want the home owners to sign a note promising to pay some or all of the balance due – debts that could burden borrowers for the rest of their lives.
Moody’s Economy.com estimates that about 10 million home owners have negative equity, a condition known colloquially as being upside down or underwater. By next June, the forecasting company expects the total to rise to 12.7 million — a quarter of all home owners who have mortgages.
“The first wave of foreclosures involved a lot of investors who just disappeared,� says Lance Churchill of Frontline Seminars, which teaches real estate practitioners how to negotiate with lenders on short sales. “Now, home owners with jobs and assets are underwater and want to sell. The banks want as much as they can get, today or in the future, and the owners want to get away clean.�
If the lender does a short sale without extracting anything from the seller, everyone in the country who is upside down could try to wiggle out from under and banks will take a fresh wave of hits. But if the lender pushes too hard, the borrower will default, leaving the bank in worse shape.
Source: The New York Times, David Streitfeld (09/18/08)
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