Nothing Short About Grand Rapids Short Sales
The following was a post we did in February of 2009, not much
has changed in 1 year. We are expecting the government to start incentives
to banks and second mortgage lenders to encourage the short sale process
instead of waiting for foreclosure.
Benefits:
- House usually sells for a higher price
- Credit of the seller is not affected for as long
- Neighborhood values are not affected as adversely
The term Short Sale has nothing to do with the time it takes to close
this type of transaction. It refers to the money the bank or mortgage holder
will receive from the sale of the property. The closing will be “short” of the
funds that the seller owes on the mortgage. In other words, they are upside
down- they owe more than the home is currently worth.
Since we don’t live in a past world where the home “was” worth more or
a future world where it “may” be worth more, this is the sad financial
situation many reluctant home sellers find themselves in today, selling at
a loss. It doesn’t make for happy campers.
The Short Sale scenario usually doesn’t have anything to do with
greed or mismanaging money. Many of the cases we see are typical families
that bought a home, fixed it up a little, and then got a job transfer, had a job
loss, a divorce, a family death or illness occurred which drastically changed
their financial situation.
What the falling prices on homes does is trap the homeowner.
He can’t sell it for what he paid for it—— he has to take a loss, go bankrupt,
or lose his credit rating. Many people do not have equity in their home, or
savings, or a 401K they can borrow from to pay their losses. We see that
occasionally, but it is not the rule.
The banks and mortgage companies are in a difficult situation.
They are going to take a loss, no matter what happens. The object is to stall,
wait, and negotiate until they get the best outcome they can for their company’s
bottom line. Okay, companies stay in business by minimizing losses.
But, and this is a big but, stalling, and prolonging these transactions
until the potential buyers walk away is hurting everyone. Delaying a month,
two months, three months on answering a decent real estate offer hurts the
bank, the seller, the buyer, and the real estate agent. This kind of time lag is
typical of short sales. I have heard getting these transactions to close as
compared to ” trying to land a 747 on a blade of grass. ”
Real Estate agents don’t like to get involved in these transactions
because they are prolonged, messy, tons of paperwork, many, many frustrating
phone calls, and at the end of the transaction, the bank or mortgage company
will typically “short” the commission the agent has worked for. This is another
sticky wicket because the contract is with the seller, not the mortgage lender.
So, this has to be negotiated again, if you are fortunate. If not, you take what
they will give you.
Short Sales are becoming a much more common transaction as
banks are deluged with foreclosures and calls from homeowners requesting
help. The recent * Recovery Act may be a relief valve, allowing some people
to reduce their mortgage, save their credit and their home. The first week of
March the US government will tell us what the parameters of their plan are
going to be.
*Nov 2010 Note: We have seen little effect from the Recovery Act yet.
Make sure your agent has the experience and knowledge to get you
through the minefield of short sale negotiation, if you are buying
or selling a Grand Rapids Home.
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The authors of the this blog write about Grand Rapids Real Estate,
the Greater Grand Rapids MI area, and what it is like to live in West
Michigan. Grand Rapids Michigan is a vibrant, growing metropolitan
area with a diverse business community, great medical research & services,
numerous universities,plus lively arts and entertainment of all kinds.
We believe: Grand Rapids is a Great Place to Live!
Westbrook Realty Grand Rapids MI Real Estate
Contact Terry 616-292-7263
