In a previous blog post I wrote "So Who Pays for The Difference in THIS Short Sale Deficiency!?" So many people are asking what is going on? They have tried a loan modification and that didn't work. Then the bank suggests to them to try a short sale. Okay that would seem to be the next reasonable step as they can no longer afford to keep the home. But then why are the banks declining a short sale when the price that is offered is market value. So many times the bank forecloses and relists the home for much less than the short sale offer was.
We must never forget the turmoil that the family is going through during these difficult times. Are the banks taking advantage of this process and actually making money on the loss that these people are suffering? This is the question so many people are asking. Could it be? Are people suffering while someone else is profiting. Does anyone care? Something needs to be done.
There is a video out that if you haven't seen it, I recommend that you do. http://www.thinkbigworksmall.com/mypage/archive/1/32274 This video explains how there is money being made! And it is not by you or me!
I don't think anything has been done to improve this situation yet, because I recently had a listing that was a short sale and we had a good offer on the property. An attorneys' office was handling the negotiations and we couldn't get the short sale approved. The bank finally did approve it after 9 months, (most short sales don't take anywhere near this long anymore), but the MI (mortgage insurance) company wouldn't approve it. Hence, they foreclosed. Once the property came back on the market as an REO, it was listed for $53,000 LESS (that's right, LESS, 32% less) than the offer (cash offer) we had on the home when is it was a short sale. Do we really wonder why it is taking so long to recover from this recession!?
Yes I know there are some people who are walking away from their home and are not financially strapped. They feel that it is just not worth staying in a home they owe $100,000, $200,000 or more than it is worth. And yes, I do understand that they made a commitment.... This is a topic for a different discussion. It is a difficult situation and they would prefer not to be in it either.
But, what about the rest of the owner's that fell on hard times and are being crushed? They have lost there job due to the economy, or they have fallen ill... for them this is devastating. They can't sell the home because they owe more than it is worth. They are losing something very important to them. Their home. The place they raised their family, gave birth to their first child in, the place that they intended to retire in.... We cannot forget that they are not statistics, but families. It seems that big business may be profiting from their devastation. At whose expense? Sellers? Taxpayers? What can be done now that the secret is out?!
You might be wondering why you should bother to try. The banks are not doing this on every short sale. Many of them go through just fine. I have only had this happen once out of all the short sale listings that I have had. So you may not have this problem at all! Occasionally I hear other Realtors say the same thing. So, do what you can, do what is best for your family. I always advise anyone in this type of situation to get advise from their Real Estate attorney and tax expert. They are the only ones that can give you advise.
In the future, hopefully, financial institutions will look back at this time in history, and realize this was a difficult time for a large percentage of our country. And hopefully, they will look at everyone who tried to do something to mitigate damages, such as a short sale, and make it easier on them to get financing, than if they didn't. A short sale is suppose to hurt your credit scores less than a foreclosure. But again, talk to your attorney for expert advise because I am NO expert! There are many questions they will need to ask you to determine what is best for you in your specific situation!
Ron & Brenda Cunningham
WEST USA REALTY
1640 S Stapley #124
Mesa, AZ 85204
*Recognized in the Phoenix Business Journal as One of The Top 50 Realtors in the Valley