Short Sale: Is It Right for You?

Real Estate
on December 31, 2012

When people speak of the real estate market, they are often blending all of the local real estate markets into one giant MLS service nationwide. Unfortunately, just as there are depressed neighborhoods in any locality, there are also areas of the country that are doing worse than the national average might indicate. What this means is that there are areas of the country where certain real estate moves make sense and others where they do not.

Take the issue of short sales, for example. The housing market in Detroit is so destroyed that if you lasso a buyer, you need to sell to him at whatever price you can get. In increasingly-wealthy Washington, D. C. and its affluent suburbs, a short sale makes very little sense because the market is on the rise. You will eventually get into the black again and don’t need to take a beating just to escape your mortgage payment.

As can be seen from the above examples, short sales are right for some people, wrong for other people, and there is no definite rule which applies to everyone everywhere. Even in those places where a short sale makes sense on paper, there are still individual concerns that may affect the general decision making process.

A lender is not obligated to accept a short sale offer, and there are instances where it may be in their interest to refuse one. Since many short sales are made against homes already in foreclosure or approaching it, the lender needs to weigh whether the advantages that accrue to them in a short sale are offset by those they might gain in foreclosure.

If a market is on the verge of picking up, it may well be in their interest to decline the offer and move ahead with foreclosure. After that, they can get full price on the property and regain some or all of their losses. Likewise, a lender who agrees to a short sale is essentially abandoning any future claim which can be made against the former homeowner. In foreclosure actions, for example, the borrower remains technically liable for the difference in value between the loan and the proceeds recovered by the bank via the foreclosure process.

The moral of this story is simply that short sales are not always agreeable to the lender for reasons of their own. If you have a lender who does agree to consider one, it is important to not hesitate in getting the process finalized before they have a change of heart or a change in management due to bank restructuring.

Found in: Real Estate
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