Today’s real estate investor knows there is opportunity on the table. The investor also knows that sellers are often in stressful and painful situations. As a result, some investors are waiting until banks step in and foreclose. Meanwhile, homeowners who might find help are hesitant to approach mortgage holders to research alternative possibilities. These reservations actually cost everybody money.
Frankly, the short sale is a better alternative than foreclosure and while banks may not be thrilled with the takeout offer, it just might be their best alternative. Earlier in the year, short sales were failing and pending short sales were not closing. The two primary reasons for this were that banks were taking too long to accept offers and that buyers were unwilling to wait for the long acceptance delays. In many cases, their financing commitments expired.
Banks now understand that foreclosure is expensive. These lenders are hesitant to absorb losses on their stockholder’s behalf, but foreclosures have become a way of life so banks are learning that in many cases, short sales make sense and save money.
Even before today’s massive unemployment, 42% of American households did not have enough liquid assets to support themselves for three successive months. 46% of American households had less than $5,000 in liquid assets before the recession.
The likelihood of a successful short sale really depends upon the seller’s ability to negotiate with the lender in advance of the transaction. The seller who states their intention and presents the lender with a completed hardship package can pave the way for a short sale. The investor should also do their homework and compile a short sale purchasing kit complete with a description of investment strategy, balance sheets, tax returns and pre-commitment financing.
The more prepared the investor is, the more likely the approval is. The quicker the approval, the quicker the seller can start rebuilding their credit and the lower the loss by the lender.