Last week on house tour, I talked to another Coldwell Banker Realtor who has been specializing in "short sales." She has more than twenty of these listings, with sellers desperate to sell and avoid foreclosure, but only three are in escrow. Actually, her percentage is higher than most. A well-known specialist in these sales has over a hundred listings, and only a handful have closed.
Mortgage lenders say they are there to help homeowners who are having trouble making their monthly payments but who can’t sell their home for what it is worth in today’s market. Both homeowners and the banks themselves lose out when banks are unable to close these “short sale” transactions.
In a short sale, homesellers ask their lender to accept a buyer’s offer that is less than the amount needed to pay off the balance of the mortgage. Lenders who agree to a short sale also typically agree to forgive the remaining debt.
This can be a win-win for lenders and homeowners. The homeowner avoids foreclosure and banks avoid the cost of carrying the property through the lengthy foreclosure process, not to mention the hassles of selling an empty property in a market saturated with other foreclosures.
On average, lenders lose approximately 19 percent of a mortgage’s value with a short sale but lose an average of 40 percent on mortgages that proceed to foreclosure, according to one source.
The problem with short sales? Like other foreclosure mitigation efforts, the challenge is in determining which financial entity “owns” the loan and, thus, has the final say on a short sale offer. Banks also have been slow to ramp up internal processes needed to review and approve short sale packages. Delays and last-minute dickering often prolong or even derail transaction closings and creates frustration for potential homebuyers and their agents.
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