Real Estate Short Sale Avoid Foreclosure

What is a Real Estate Short Sale? A Real Estate Short Sale, in its most easily defined state, is when the banking company (or lender) accords to take less than what is owed to them on a property in order to avoid having to foreclose on the property and go through the costly and cumbersome task of foreclosure. Yes, contrary to what you may think, it can cost the bank more than its worth for the to foreclose a property. So definitely consider a real estate short sale.

If you are in a situation now where you might be getting your house or property foreclose, you may want to consider this option to avoid foreclosure, if available. It's the best case scenario for both the lender and the borrower as the borrower can avoid having his real estate property getting foreclosed and reflect badly on their credit report and the lender(usually the bank) saves money in the foreclosure proceedings and does not have to market the property through a real estate broker.

In the current real estate market, with real estate prices dropping all around the country, sub-prime lenders going under, and adjustable rate mortgages maturing, most of the country is experiencing the need for real estate short sale. Economic indicators at the time of writing of this article show that there is no slow down in the short sale market in the near future because borrowers are simply unable to repay their mortgages, whether it be from job instability, forced moves without any equity in their current home, area depreciation, or the most popular – adjustable rate mortgages that have matured and put the payments out of reach of the borrowers who were told they could always refinance.

I have a friend who works as a ground maintenance person for a small school and does not a whole lot of money. He owns a beautiful trailer home, but he is constantly trying ways and means to refinance to pay for his home and make ends meet. Thankfully, he's job is quite stable now and he is not in a foreclosure situation.

In a foreclosure situation, while the laws pertaining to foreclosures vary from state to state, the ultimate proceedings would comprise of the bank, which is often out of state, contacting someone local for a broker’s price opinion (BPO), commonly performed by a real estate broker who is on a list with the lender or the company the lender contracts through. During this time, the lender has most likely already started proceedings through an attorney to file the foreclosure in the county the property is located in. Upon completion of all proceedings, the lender may still have to file a formal eviction to remove the owner from the property.

How long does a foreclosure take? Some states, a foreclosure could be completed in as little as 30 days while others can take up to 6 months (or even longer). Once the foreclosure is finalized, the lender has to secure the property and then get it marketed to be sold, generally much less than value because it is typically investors looking at foreclosed properties and will often sell for 10-15% below market value, sometimes even less!

What is a typical real estate property short sale scenario? In a short sale scenario, a real estate contract, or offer to purchase, can be below the amount that is owed by the borrower subject to the lender’s approval. The lender can approve the short sale and be completely out of the property with minimal headaches as soon as the purchaser can close escrow, avoiding months of sitting on the property, legal battles, and short sales generally sell for right at, or within 5% of market value, thus increasing the bank’s bottom line all around.

In conclusion, is it worthwhile to get into the short sale for your property? While there are numerous "hoops" the borrower has to jump through and numerous items the real estate short sale agent or broker needs to know, short sales can be very easy when approached correctly. Remember that the lenders LIKE to do short sales in lieu of foreclosing because it can often save them money in the long run.