In this market, you can’t go through home listings without finding a short sale on the MLS. It’s amazing to see that in some areas, foreclosures and short sales have dominated the home listings. Most buyers, may think this is a great opportunity to get a good deal on a home….but that may not always be the case.
Real estate agents across the country are calling the short sale system broken since many realtors and eagerly awaiting buyers are trying to get into a home but the lenders are not responding to calls or status requests on the approval.
A short sale, is where a borrower sells the home for less the market value and the bank or lender receives less than the amount owed on the loan. The borrower’s credit rating is hurt, but not as bad as a foreclosure would cause.
From first glance, short sales appear to be a win-win strategy for the seller, buyer and the bank or lender. Due to the amount of people involved in a short sale, the amount of time, patience and stress can can its toll.
Typically in a short sale deal, it requires at least double the time and effort of a typical deal to close the deal.
According to a Reuters article, that many lenders are demanding higher prices before allowing a distressed owner to sell off the home in a short sale.
The lenders are not accepting bids below specific internal targets, which can cause the home to go into foreclosure, and a lot of time, cause the bank or lender to lose even more money in the long run, since they will typically receive bids usually far lower.
Due to the many short sales across the country, realtors think that lenders do not have the people skills to process and handle the many short sale inquiries..thus, lenders are taking way too much time to evaluate the offers. Apparently, the National Association of Realtors says that 9 out of 10 cases, the banks or lenders will lose more money in a foreclosure.