Short Sales Resisted as Foreclosures Are Revived?

Short Sales Resisted as Foreclosures Are Revived

?

I came across and interesting article in the New York Times this past Sunday and I thought it might be worth addressing a couple points especially for those of you out there contemplating a short sale and are not sure if it's worth the effort.

Regardless of what you might hear from the person who's done a short sale, the agent who's handled a couple short sales or the guy who knows a guy who knows a guy who attempted a short sale, banks are accepting them and from our experience, at a very high rate.

Generally speaking, over 85% of short sale offers that we submit to the lenders are accepted. Overwhelmingly, we lose more deals to buyers walking, than we do to lenders denying them

Naturally, there will always be instances when offers good offers at that are inexplicably denied. However, "no" isn't always the final answer. More often than not (as Ms. Sweetland found out in the article), it's only the first response. If you're working with someone who knows what they're doing, the odds of "no" being the final answer are greatly reduced.

If anything, now more than ever short sales should be even more attractive to buyers. While the brief halt to foreclosures has since seen most lenders return to business as usual, it's left a lasting impression on potential buyers. Many tend to believe that lenders simply saying that their foreclosure practices are "sound" won't be enough to convince potential buyers. Given the choice between a short sale and a foreclosure, the short sale is now the significantly safer bet. After all, purchasing a short sale doesn't run the risk of being told a year from now that the home you purchased was foreclosed on illegally and you have to move out.

While the article is accurate in its description of the hesitation lenders and investors especially Fannie Mae seem to have when considering a short sale, it's important to remember that a short sale is always going to cost them less than a foreclosure. Sometimes, they just need a reminder - a detailed BPO (Broker Price Opinion) or a well-written hardship letter certainly can help them get past their "hesitation". More than that, the lender needs to know that you're serious about walking away. Many lenders seem to be under the impression that if they deny your short sale request, you'll simply resume making payments. Slowly, they're learning that is not the case. When we let them know that it's between accepting our offer or us mailing in the keys, the former tends to be the lenders choice.

Of course, we've completed many short sales where no significant, or at least traditional, hardship was present, but that's where a contribution might be necessary from the borrower. For as much as I hate defending banks, they do have a contract with you and you do have an obligation to them. If you have significant assets or high income (or both), it isn't realistic to think they'll let you walk without paying anything. But if you're willing to pay something typically 20-25% of the deficiency odds are, it'll be worth their while to accept the short sale. At that rate, they're likely making more than they would if they pursued you, when factoring in their legal fees, costs of carrying the house and chances of recovering the full amount owed.

The bottom line is, a short sale is really only resisted when not properly presented and pursued. If you have the right people working with you, you can still walk away from your home knowing you made the best of a bad situation and saved yourself and your lender(s) tens of thousands of dollars. Whether they want to believe it or not

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