Short Sales, the real deal
Everybody wants a short sale, right? That’s the real estate holy grail, right?.
Here’s the truth, guys – short sales are not the best deals AND they should be called Long Sales.
The Heck You Say!
Okay, so lets open with a overview of what a short sale is. A short sale is {the sale of a property|property selling| that is about to go into foreclosure, normally with missed payments. If a Realtor is involved, the Agent normally gets the owner to assign the ability to try to negotiate a payoff with the mortgage co, usually through the loss mitigation dept. of the bank.
The truth is –
1. The mortgage co will not talk if foreclosure is coming up. Here’s Why -
a. The mortgage co has to arrange for at least a bpo – broker’s price opinion – to get a idea of the sale value of the house.
b. The bank has to communicate with investors backing the loan – folks that have no incentive to take less.
c. Unlike in foreclosures, where a bank with a first position mortgage takes precedence in getting paid, a short sale position makes the bank have to negotiate with other mortgage and lien holders.
2. Foreclosures are ‘drying up’ in many places. There’s no incentive for the bank to avoid foreclosure, other than attorney’s fees – which will be way lower than 2nd mortgages and liens/judgements that would be wiped off with a foreclosure.
3. The bank will realize speed is not necessarily helpful.
Here’s an example where a bank would drag everything out –
The broker’s price opinion says the home is worth $300,000.
There is $350,000 owed on the home.
There is an offer on the table for $225,000.
There is a second mortgage on the property for $30,000.
There is a judgement on the property for $15,000.
If the bank takes the offer, and can negotiate the second down to $5,000 (by threatening foreclosure) and the judgement down to $2,000(again by threatening foreclosure), it’s looking at
-$132,00 loss accepting the offer as it stands.
$107,000 loss if it can counter the offer up to $$250,000.
Let’s say the bank gets $300,000 in a counter – bpo value. Then its taking a $50,000 hit and STILL has to negotiate payoffs of the judgement and the 2nd.
Let’s compare this to a foreclosure situation on the same property –
Bank sells it for $310,000 because there is foreclosure hysteria out there – people are paying over retail in many cases! – and takes a $40,000 hit on the sale and another $6,000 hit for attorney’s fees.
You’re the bank – what do you do?
Okay, I can hear some of you saying, ‘what about Realtor fees?’. Okay, let’s say 6% on the short sale – $15,000 – vs. 6% on $310,000 foreclosure – $18,600. The bank is STILL ahead in a foreclosure.
Now let’s talk about surplus funds, also called excess proceeds – This is where the property sells at foreclosure for an amount that is above the monies needed to pay off the debt owed to the bank and the attorney fees.
Where does that money go?
Go Here to Find out – CLICK HERE FOR MORE ABOUT UNCLAIMED MONEY, SPECIFICALLY SURPLUS OR EXCESS PROCEEDS!!