Short Sales, Loan Modifications and Foreclosures

The other day I was reading an article in the Charlotte Observer that talked about the rise in foreclosures in Mecklenburg County(primarily Charlotte). At the current pace we will eclipse the record number of foreclosures set back in 2008 by a substantial amount. Why with the government programs and banks considering short sales are the numbers so high?

Well first, by definition a short sale is when the bank agrees to accept less than what is owed on the home due to a hardship that makes it difficult or impossible for you to make the current mortgage payments.

Some people I know who have lost their home to foreclosure told me they did not think there was enough time to process the short sale paperwork. They said "I have to do all this work and they are still going to take my home anyway". Well, maybe. However; the bank knowing that you are going to lose the home would rather work with you to sell it; than incur the additional costs involved in foreclosing on the home. Besides that the process takes significantly longer; there is added expenses that comes with the foreclosure process. A lot of times when you receive an offer on your home; the bank will put a hold on the foreclosure proceedings so as to work with the potential buyer to make the transaction.

Loan modifcation was in theory a great idea to keep people in their homes. However; as the economy has been slow to recover it has not worked out the way the governemnt had planned. Yes, there are a lot of people who received modifcations on their loans temporarily on a trial basis. But when the trial was up they were in no better financial shape than before. Thus they are either losing their home to foreclosure or short sale. But, it can buy you time to find a better paying job (or a job if you are unemployed) and keep you in your home.

Foreclosure is the most expensive option out there to not only the homeowner; but the bank as well. The added cost of the proceedings and paperwork adds up quickly. Then there is the maintenance of the home while they wait to have it sold... these are all options the bank would like to avoid. Yet, I hear many people say "the bank would rather have me foreclose on my home than help me sell it or work out a modification on the loan".

I have done a lot of short sale business and foreclosure sales in the past year. Talking wth the different banks I have dealt with in general terms they would rather exhaust every and all options before they are forced to foreclose on a home. For them the loss is greater than they want to do. If they can get a loan modified or sold through short sale it saves them thousands of dollars per home. It adds up quickly.

Dave dicecco
Realtor/Broker
www.davedicecco.com