Tuesday, March 11, 2008

When A Short Sale Isn't a Short Sale

When A Short Sale Isn't A Short Sale
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Real estate agents are complaining that some homes marketed as short-sale properties are not actually short sales. In a short sale, the lender signs off on a real estate transaction in which the sale proceeds fall short of what the owner owes for the mortgage.

A decline in the home's value since the date of purchase, or a seller falling behind on mortgage payments do not automatically qualify a home as a short sale. There can be no short sale without the lender's approval, as the lender must consider whether it is worthwhile to accept less than the full loan amount in order to avoid a foreclosure.

What is there to gain by marketing a property as a short sale that isn't a short sale? Serious buyers are a rare breed in some market areas these days, and many of them are looking for bargains. Short sales can in some cases sell for a lower amount than comparable properties that are not similarly distressed, as there is urgency by sellers to get out from under the properties and by lenders that wish to avoid costs associated with foreclosure.

So just like those furniture stores that seem to perpetually advertise a going-out-of-business-everything-must-go-including-the-plastic covers-on-our-electrical outlets-final-ultimate-last-possible-ever-chance-to-buy-cheap-stuff-from-us sale, dangling the "short sale" term in marketing a property may be an effort to attract bargain-basement shoppers.

Short sales and other properties in some stage of foreclosure have become a substantial market segment in some hard-hit areas.

Short Sale (of house)
A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. See also deed in lieu (or foreclosure).

Deed in Lieu (of foreclosure)
A means of escaping an overly burdensome mortgage. If a homeowner can't make the mortgage payments and can't find a buyer for the house, many lenders will accept ownership of the property in place of the money owed on the mortgage. Even if the lender won't agree to accept the property, the homeowner can prepare a quitclaim deed that unilaterally transfers the homeowner's property rights to the lender.

The forced sale of real estate to pay off a loan on which the owner of the property has defaulted.

A failure to perform a legal duty. For example, a default on a mortgage or car loan happens when you fail to make the loan payments on time, fail to maintain adequate insurance or violate some other provision of the agreement. Default on a student loan occurs when you fail to repay a loan according to the terms you agreed to when you signed the promissory note, and the holder of your loan concludes that you do not intend to repay.

If you believe you may fall under one of these and would like some assistance, give me a ring or visit my website.

Pam Winterbauer
2006 REALTOR of the Year
Windermere Welcome Home
925 824-4878 / 510 889-8889
Toll Free: 877 876-8889

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Pam Winterbauer
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