Tuesday, January 22, 2013
Wednesday, January 2, 2013
Short Sale Myths and Why Now is the Right Time
I've been giving this blog alot of consideration lately. With so much information to be absorbed on the subject it's easy to understand why so many people are misguided. Much has happened in the world of Short Sales over the past several years. On a weekly basis it seems I'm being asked "what exactly IS a short sale" or someone will say to me "I'd like to buy a short sale but I don't want to wait 7 months for it to close" - a comment I will address later in the Short Sale Myth section of the blog.
First lets look at what a "housing bubble" is. Besides a fancy term heard routinely in the media, the United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. On December 30, 2008 the Case-Shiller home price index reported its largest price drop in its history. As a result of this and overall economic crisis across the nation, distressed property sales spiked.
It would stand to reason that the average homeowner needing to sell their home, probably couldn't afford to sell because they owe more than the home is worth. Many sellers became behind in mortgage payments due to a variety of reasons. Many were in dual or multiple mortgage situations and many had a loss of income. As homeowners faced foreclosure they failed to seek the advice of a professional. Many didn't even know a Short Sale was a viable alternative to Foreclosure.
So the big question - WHAT EXACTLY IS A SHORT SALE? Wikipedia's definition is - a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts, and whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt.[1] Any unpaid balance owed to the creditors is known as a deficiency.[2][3] Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties. However, in some states, legislation was passed to preclude deficiencies after a short sale is approved. The same is true of lenders on first loans and lenders on second loans - once the short sale is approved, no deficiencies are permitted after the short sale.
First lets look at what a "housing bubble" is. Besides a fancy term heard routinely in the media, the United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. On December 30, 2008 the Case-Shiller home price index reported its largest price drop in its history. As a result of this and overall economic crisis across the nation, distressed property sales spiked.
It would stand to reason that the average homeowner needing to sell their home, probably couldn't afford to sell because they owe more than the home is worth. Many sellers became behind in mortgage payments due to a variety of reasons. Many were in dual or multiple mortgage situations and many had a loss of income. As homeowners faced foreclosure they failed to seek the advice of a professional. Many didn't even know a Short Sale was a viable alternative to Foreclosure.
So the big question - WHAT EXACTLY IS A SHORT SALE? Wikipedia's definition is - a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts, and whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt.[1] Any unpaid balance owed to the creditors is known as a deficiency.[2][3] Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties. However, in some states, legislation was passed to preclude deficiencies after a short sale is approved. The same is true of lenders on first loans and lenders on second loans - once the short sale is approved, no deficiencies are permitted after the short sale.
A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower....
Basically a short sale allows you to sell your home for less than you owe. The process will be addressed in a follow up blog but for now I want to list a few common myths associated with short sales.
1) My credit score will never recover - while a drop by as much as 300 points can be seen with a foreclosure, the drop as a result of a short sale is only half.
2) Short Sales take too long - Yes, the average short sale takes longer than a 30-45 conventional closing BUT, banks have come along way getting their paperwork act together and many have streamlined the process online. Using an experienced agent who knows how to negotiate a short sale will not only help you to close the deal sooner but these agents are closing a higher percentage of the short sales they represent.
3) I'm going to owe the money anyway - Many short sales when approved negate a deficiency judgement which means you can move on without the short fall hanging over your head.
4) You have to be behind on your mortgage to be considered for a short sale - While this used to be the case it is no longer true.
5) There isn't enough time - There is always time. I've negotiated short sales when the house had already gone into foreclosure.
6) The bank would rather foreclose than approve a short sale - This simply is not true. Foreclosures are very costly and as long as the seller qualifies the short sale will be considered.
If you or someone you know is in a distressed housing situation, tell them about my blog. Now is the time. Don't wait until it's too late and be sure to contact me at 843-368-4324 or mmiller@hargray.com if you're in the Bluffton, Hilton Head Island real estate market. I also have a long list of referral agents in areas across the country. Have a Happy Healthy 2013 and hopefully it's a prosperous one.
Subscribe to:
Posts (Atom)