ALL YOU NEED TO KNOW ABOUT FORECLOSURES AND SHORT SALES

Foreclosures and short sales; everyone’s seen and heard of them.  If there are any words that best describes today’s market, these would.

In general terms, this is how the majority of these properties came to be.  During the market boom of past, housing values escalated, resulting in sales activity of homeowners wanting to take advantage of their equity, brisk market times (not enough inventory!) and alluring financing options.  Buyers took advantage of the great mortgage rates, many of which were zero down payment options with adjustable rates (rates that adjust over a period of time, based on the current prime rates).

Shortly after this period, many rates adjusted upward concurrently with dropping housing values.  Homeowners were taken aback by the increased adjustment of their mortgage payments!  Many didn’t have the option of refinancing for better terms and rates as in the past due to the lack of equity earned in their homes.  What they faced was a mortgage loan that outsized the value of their home, and in an attempt to unload their home, entered into a SHORT SALE.  In doing so, a process with the lender (or lenders, if there's a second mortgage involved) was initiated to allow the owner to sell their home for less than what is owed on their mortgage.  The sale of the home now involves two principals, the homeowner and the lender; the homeowner being at the mercy of the lender who will have the final authority on accepting the offer, as well as determining all payoffs.  The deficit between the proceeds of the sale and the outstanding loan amount will become stated income for the homeowner.  Add to this process, the effects of the banking industry with its layoffs, mergers, and accusations of misconduct.  It becomes a lengthy progression of miscommunication, ball-dropping, and musical staffing that is a test of endurance and not for the faint of heart.

If the homeowner no longer can continue with the mortgage payments or, the lender doesn’t approve a short sale scenario or, the property doesn’t sell, the lender then files a Notice of Default (NOD) on the property and then enters into the process of FORECLOSURE.   The bank-owned property, commonly known as real estate owned (REO) property is placed on the market for sale.  The buying process for foreclosed property may be more streamlined than a short sale because you are dealing directly with the principal – the bank.  Properties are typically listed below market, creating a demand driving the price upward.   In most cases, it is a multiple offer situation with the bank soliciting several rounds of best offers to create a process of elimination. Many of the bidders will be investors who have cash ready with no contingencies.  If you have the patience to endure, you may outlast any other bidders, but buyers should be prepared to pay a price higher than expected and plan a total revamping of the distressed property.

Don’t go it alone!  Ask me about helping you with short sales or foreclosures!

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