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Lenders Learning to Speed Up Short Sales to Reduce Loss from Foreclosure



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By : Kristine Squiers    99 or more times read
Banks have been having too many home owners facing the issue of not being able to afford their homes in this tough economic climate. Home owners bought houses based on incomes that may have evaporated because of the economic downturn. Home owners also have found that with this poor economy, the home they bought no longer has the value it once had, and when they need to sell it, they are in a position of not being able to get what they owe on it. It is an economic reality many people in this country are facing.

Banks have finally decided to streamline the process that allows troubled homeowners to sell their home for less than they owe the bank, what is termed a short sale. Not only does the bank minimize their loss by not having to foreclose on the home, the struggling homeowner can get out from underneath burdensome mortgage payment-not to mention the ancillary costs of maintaining the home. A ‘Win-Win’ for both the lender and struggling home owner.

The Ann Arbor real estate market, at the beginning of the housing crisis, seemed to weather the "short sale storm” relatively well. Unfortunately, the Ann Arbor sliding home values of the past 2 years have caused many Ann Arbor home sellers to be “upside down” regarding their equity position.

Normally, a short sale is a long and laborious process, taking anywhere from 3 -6 months to get approved by the lender and to close. In the past,About 60% of approved short sales never close, largely because the buyer walks away from the deal. Banks are trying to make this approval and purchasing process faster in order to keep buyers interested in the sale. Banks lose money on foreclosed homes, and are not in the business to be real estate barons, they are now realizing they need to make serious changes, and are implementing them to reduce foreclosures and subsequent loses.

So, what are the lenders doing to speed up the short sale process? Well, the big change I’ve seen is that most lenders used to require an offer before they would start the short sale process. Now, they encourage the homeowner to contact them early, so they can assess whether the home would qualify for the program and help them set a proper price.

The other noticeable item is that the lenders are trying to get the short sale approval process shortened from the average of 90 days down to 30 days in some cases.

These are all positive signs from the lending institutions. They probably realize, as I and my fellow Certified Distressed Property Experts do, that short sales will most likely be around for some time to come, especially if property values continue to decline or remain flat.

Some caveats for ‘Short Sale’ Buyers and Sellers.

SHORT SALE BUYERS

  1. Be patient. This will not be a quick process.
  2. Expect the unexpected.
  3. Hire an Ann Arbor Realtor that is C.D.P.E. trained.
  4. Don’t think you’re going to ’steal’ the home from the bank. Expect a 10%-15% discount from the lender off of the listing price.

SHORT SALE SELLERS

  1. Don’t expect the bank to take a bath on the house, especially if you have assets…like $25,000 sitting in your savings or checking account. Some may, but not very likely.
  2. Be prepared to provide detailed financial information and to submit a compelling hardship letter, explaining why you should qualify for a short sale, to your lender(s)
  3. Be prepared that your lender will expect you to work out a repayment plan with them for the deficiency. Your goal is to have the deficiency amount forgiven-in-full, ‘Without Recourse‘. This is where your C.D.P.E. Professional can assist you greatly.
  4. Expect a buyer or two to walk away before you get one that sticks.
  5. Hire a C.D.P.E. Certified Real Estate Professional.
www.wicklandgroup.com

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