When a homeowner falls behind on their mortgage payments, the lienholder starts the collection calls right away. The homeowner in turn calls customer service and asks how to reduce their monthly payment. Customer service representatives, following their script, ask why the homeowner is not making their mortgage payments. If the answer is prolonged unemployment with no job prospect in sight, for instance, customer service will automatically suggest short sale as one of the foreclosure alternatives. The end result, therefore, are the numbers you see above, with short sales outnumbering foreclosure.
In light of this new reality for underwater homeowners in our area, here are some commonly asked questions about short sale.
Q: How long does it take to close and get a key for your new short sale home?
A: A home that is sold through a short sale takes longer than a foreclosure to close because the process is lengthier and involves many more steps. As you probably know, most foreclosed homes are vacant because the owner either has been evicted or walked away from their loan (which is credit score death incidentally, compared to short sale) and the house is vacant.
When a buyer makes an offer on a foreclosure, the buyer’s agent submits the offer directly to the bank that owns the foreclosure. On a short sale property, the buyer’s agent submits the offer to a team of staff within the mortgage servicer, which is the name you see on the loan statement (e.g. Bank of America or Wells Fargo). When an offer is received on a short sale home, the mortgage servicer will then perform an appraisal to determine whether the offer is a fair market value for that home. If so, the offer will be sent to the negotiator to be forwarded to the investor who owns the property for a response.
Who is the investor? The investor is the mysterious entity that initially loaned the homeowner the money to buy their home. Why do I say “mysterious?” Because the investor’s name is never on the mortgage statement so homeowners usually have no clue who owns their loan. Once an appraisal is performed, the investor either will accept or deny the offer or will counter for more money.
The entire reviewing, appraising, responding and countering process usually takes between 90 and 120 days. Note that a HAFA short sale is a different story altogether and might take even longer to complete.
Q: How does a short sale benefit the homeowner?
A: Banks are in the business of providing loans so they can make money by collecting interest — strictly money in its purest form. So, the bank cares about one thing and one thing only, which is M-O-N-E-Y! This is why, as I mentioned earlier in the article, lien holder customer service immediately suggests to homeowners that short selling might be their only option. They know, just as I know and now so do you, that this option usually allows the homeowner to live in the property four to six months longer than if they foreclosed.
The homeowner must maintain the property by keeping the utilities on, lawn watered and HOA dues current. This additional four to six months will buy the homeowner more time to save up for a nice rental and also usually eliminates the panic factor about being evicted if their home is foreclosed.
This is the most prolonged, bad economy we have ever experienced in our lifetimes. It is my sincere belief that everyone has learned the lesson not to overspend. Going forward, as consumers we all need to look at our finances differently and learn to live within our means. Because as many of us have learned the hard way, whether the banks are fast or slow to foreclose, the president, Congress and all the other powers that be in Washington have not made it their job to help you fight foreclosure and keep your home.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.