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WILL MY LENDER(s) ACCEPT A SHORT SALE?
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While most lenders will not be thrilled at the prospect of a short sale they are acutely aware that a foreclosure is usually a far more time consuming and costly option. In a real estate market where housing values are going down it is in the best interests of the lender to liquidate their problem loans as quickly as possible.
With a short sale a property can be sold and the loan taken off their books fairly quickly.
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they pursue a foreclosure they run the risk of the
process taking a substantial amount of time during
which the value of the property is depreciating.
Also, buyers will tend to write low ball offers when
they know that a bank or lending institution owns
the property. The property will also be left vacant
which can result in vandalism and deterioration.
Some owners will even gut the house just before the
foreclosure sale as a way to “get back” at the
lender. This is illegal but nonetheless happens on
occasion. So, you can see why a lender might want to
go the short sale route and get the loan off of
their books with minimal hassle.
How Do Lenders Benefit?
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- Not having another “bad debt” on the books.
Most investors require their lenders not to
exceed 3% of bad debts on the books.
- Not having to complete the expensive
foreclosure process including all of the legal
fees and procedural duties.
- Not having to evict occupants and pay for
their cooperation.
- Not having to rehab the property. (I.e.,
Contractor bids, disgruntled borrower
vandalizing, etc.)
- Not having to later sell the property for no
more than the proposed short sale would
generate, or even less as the market continues
to decline.
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