Why do lenders agree to Short Sales?

June 16, 2009

short-salesThis is one of those questions many people are asking me these days. There are so many homeowners in Tampa Bay, Florida that are behind on their payments and exploring their options that I thought I’d write a bit about why short sales make sense for lenders. I can assure you they aren’t accepting less than you owe because they want to do you a favor!

Lenders are willing to accept a Short Sale for the following reasons:

  • To avoid the cost of foreclosure — Lenders lose, on average, $50,000 per foreclosed home
  • To avoid adding additional real estate to their inventory; afterall, they are in the business of lending money, not purchasing homes
  • Perhaps the Seller has a true hardship and is a likely candidate for filing bankruptcy

So even though a short sale might be in your lenders best interest it is often a challenge to get them to realize this fact. This is why you need a knowledgeable Realtor skilled in navigating complex real estate transactions like Short Sales. Please don’t hesitate to call me if you have questions or need help. Also, you’re free to post comments right here and I’ll respond quickly.

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2 Responses to “Why do lenders agree to Short Sales?”

  1. cindy on January 8th, 2010 12:33 am

    I was wondering if I could get a little more info. On short sales. I see you are in Clearwater. My home is in Riverview Florida. I have a 1st mtg with Wells Fargo and a HELOC with Bank of America. COmbined I owe more than I could probably get for my home and having a year without any income and about 7 months with non paying renters in this home of which we have two that we are drowning in. I may have to give it up. I could get renters but since I didn’t get paid from my renters we got behind and I have 3 potential people to rent the home but I can’t do that to them if it goes into foreclosure and I dont’ get a modification. I’ve been working with Wells for a mod. But so far I’m still waiting and don’t know if I should just short sell it while it’s empty. Reading your info. It sounds like it may be hard to get a short sale and I’ll end up in foreclosure. I’m looking for a specialist in this area that has good results with negotiating short sales.

  2. Chris O'Connor on January 8th, 2010 1:09 am

    Hi Cindy,

    Please email me your phone number and I’ll help connect you with someone that knows the ins and outs of short sales in Riverview.

    I definitely suggest you get it on the market right away for several reasons. First of all prices are still declining and will for some time still. So selling sooner is better than later. The next reason you want it on the market is because both of your lenders want to see a seasoned listing. They want to make sure your home has been sufficiently exposed to the market before they will accept a short sale. So get it on the market right away so the clock starts ticking.

    You also want to price high enough in the beginning to demonstrate to your lenders that you at least tried to get them the most the market would bare. The banks will look at the “Original List Price” so you actually benefit by pricing it high even for a day or two and then drop the price till you start getting buyer calls.

    It is hard to summarize the strategy for selling short sales. Just know that the average agent isn’t very good at it. This is why less than 25% ever sell. You definitely need someone that knows what they’re doing.

    Even if you have renters in the house you can still put it on the market as a short sale. The problem is tenants can be a big headache for home sellers. They don’t want to be inconvenienced by buyers. They also don’t really want you to sell the home. So they will make things difficult for you. And if those tenants realize that you’re collecting rent from them and then not paying your mortgage what do you think they’ll do?

    Give me a call and I’ll get on the phone and find you an agent that knows how to handle short sales effectively. Again, most don’t have a clue. I personally negotiate all of my own short sales.

    Your HELOC is with Bank of America. Bank of America is the absolute worst lender for short sales. They are extremely slow and the vast majority of people in their short sale department are completely incompetent. It takes patience, knowledge and assertiveness to deal with them.

    I just closed on a Bank of America short sale and it was by far the most painful short sale experience I have ever done. I submitted the short sale to the bank on August 4, 2009. We closed Monday, January 4, 2010. This is exactly 5 months. It wasn’t just the waiting that was difficult. I will refrain from saying anything else about that bank right now because I am currently working another short sale with them. We went under contract over 2 months ago today and the file still hasn’t been assigned to a negotiator. Ever time I call the short sale agent assures me she is having the file escalated to a manager. So far 4 employees have promised the file would be escalated, but no escalation has happened.

    Again, call me and I will help you. I can’t do much through these comments, but I will answer questions. I wish you luck. Be patient. You can definitely get your home sold and save your credit score from the hit of a foreclosure. You’re just going to need the right Realtor to help you.

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