The North County Times did an article about the difficulty of doing Short Sales. It reinforces the idea that you need an expert on your side. You wouldn’t go to court without an experienced attorney. Why would you go to your lender without an experienced short sale specialist?
Short sales have always been more complicated and taken longer than other sales because lenders usually verify financial hardship and determine what is an acceptable amount to lose on the property. In many cases, a second lender has loaned $50,000 to $100,000 on a property and is being asked to settle for $10,000 or less. Some lenders also demand that the borrower repay a portion of the remaining balance over several years after the deal closes.
But agents say short sales have grown more complicated than ever, because of their sheer number, because of the prevalence of second loans, and because several large lenders have recently merged with others. Agents have complained that it’s possible to call a lender three times in a week and get three different people responsible for the same property.
Beer said the situation may have eased in the last couple of months as lenders develop standards for approving short sales. The second loan is often paid off at 5 cents on the dollar, a low percentage that is nonetheless fair because such lenders get nothing in the event of a foreclosure, Beer said.
Agents have said pressure from federal and state governments has helped to discourage outright foreclosure, thus gumming up real estate markets. But Beer said such pressure and the smaller losses that result from short sales are also incentive to move them along.
I agree short sales have grown more complicated than ever…and Beer said the situation has eased in the last couple of months.
I don’t agree that there has been much easing because the banks are so overwhelmed. Most second lenders will not even consider releasing the lien for less than 10% of their outstanding balance. Bank of America is now requesting the sellers provide a small cash contribution at closing or sign a promissory note as part of a morale obligation.
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