Short Sale!
Currently there is a lot of talk about short sales, but what is a short sale? A short sale is the sale of real property where the fair market sale price is less than what is due on existing loan(s).
Today, foreclosure on a property is not the automatic answer to the problem of salvaging a bad real estate loan. Foreclosure is expensive for the lender. The lender is without monthly payment on the loan, there are foreclosure fees, holding costs, repair costs, marketing costs and costs of sale. A short sale is a way to prevent costly REO (Real Estate Owned) property to go back to the mortgage company after an unsuccessful foreclosure auction.
Keep in mind that a seller does not automatically qualify for a short sale. The first thing a seller must do is prove “hardship”. Also, if the Seller had obtained junior loan(s), the holder(s) of the junior trust deed(s) must agree to a release of their liens with little or no payment.
A successful short sale transaction requires the cooperation of all parties in the transaction. Normally, the lender will have restrictions on the amount of closing costs, repairs and even commissions.
The number of homeowners that will require short sales is staggering. Below are some statistics:
· 2.2 million U.S. households (460,000 California households) that refinanced with sub prime mortgages between 1998 and 2006 are expected to lose their homes to foreclosure (Report from Center for Responsible Lending, December 2006).
· One third of families who received a sub prime loan in 2005 and 2006 will ultimately lose their homes (Report from Center for Responsible Lending, December 2006).
· In most California cities, as well as in Denver, Washington, Phoenix and Seattle, interest only loans represented 40 percent or more of all mortgages issued in 2005. (New York Times, July 15, 2006).
· 15.2 percent of 2005 home buyers with pay-option ARMs now owe at least 10 percent more than their houses are worth (Comstock Partners, 2006).
· 13 million householders in the US (1.7 million in California alone) currently have no net equity in their homes (CoreLogic, 2007).
