In some California communities lenders have taken back more homes through the foreclosure process than they have in over a decade. The economy, corporate downsizing, defense cutbacks and slow housing sales in the recent past all combined to create a large group of homeowners who lost a significant portion of income. These owners do not qualify for refinancing, cannot keep up with current payments, or have lost so much equity in their home that the loan amount is equal -- or nearly so -- to the price the home would bring on the current market.
At the same time, lenders are under pressure from regulators to reduce the amount of homes they actually own, called REO (real estate owned) or non-performing real estate portfolios.
When a lender pursues a foreclosure full-term and obtains ownership to a property, they often net much less than the original appraised value; foreclosure properties sometimes sell nearly 20% below the market value of comparable homes. The more properties lenders acquire through the foreclosure process and dump on the real estate market at prices below current value, the, worse the market becomes -- a downward spiral.
At this point, some lenders are increasingly willing to bend the rules and bargain with homeowners and are more inclined to cut a deal for fear of losing even more money through the time-consuming foreclosure process.
Short payoffs, or short sales, are the latest catch word in real estate -- more prevalent in today's market and a significant trend of the 90's. A short payoff is termed as "any debt forgiveness granted to a homeowner by a lender." Often a short sale comes in the form of a bank allowing a homeowner to sell a home for less than what is owed against the property.
Many homeowners in today's market do not think they have a choice about whether to stay or sell! If your equity has fallen and your calculations show no room for profit, you may think you have no choice but to stay in your home. In fact, an agent may have told you there was nothing he or she could do to help. The opposite is true -- there are qualified professionals who have implemented programs specifically designed to assist you in negotiating short payoff arrangements with your lender.
We can help owners who are in default or on the brink, or have little or no equity in their home, yet need to sell and walk away with credit intact. The process of negotiating with a lender on a market value sale begins by offering the property for sale at a price which is less than or close to what is owed against it. The lending institution is generally only interested in negotiating once a qualified offer to purchase the home is obtained, so contacting the lender beforehand is sometimes pointless.
Sounds easy, but it can be complicated and difficult. A real estate agent such as myself, experienced in short sales, can guide you through the paperwork with a minimum of frustration, assist you in understanding the tax consequences of selling at a loss and help you complete the sale without a cloud on your credit.
For more information about this or any other aspect of real estate sales, call me today.