Stopping Foreclosure NOW for U.S. Homeowners
by Jules Harper, REALTOR, Short Sale Specialist
In today's real estate climate "Consult A Realtor" isn't just a catch phrase as of years past but a valuable word of advice for many of the victims affected by the onslaught of delinquencies and foreclosures plaguing the U.S. economy. Real estate professionals are honing their negotiation skills in an effort to save and help resurrect their clients' credit scores in addition to helping Buyers purchase with built-in equity. Although there are a few options that homeowner's may pursue to help relieve the situation, short sales are a favorite amongst many looking to end the pain and start over anew. This method is best left to savvy investors and, of course, specialized real estate professionals due to the complexity of the these types of deals.
As a professional investor and Realtor, I have been utilizing the short sale method to create WIN-WIN-WIN scenarios for several years. Even in up markets, this option proves to be highly effective. To explain, a "short sale" is simply a term used to describe the willingness and agreement of a lien holder to accept a reduced payoff on its mortgage such that the sales price is sufficient enough to pay off the reduced balance.
BANK WINS: Lenders, mortgage companies, securities investors, banks, and mortgage insurance companies do not want these properties back at foreclosure for the main reason that REO or real estate owned properties once owned by the bank become non-performing assets affecting the bank's ability to borrow funds from the Federal Reserve and lend at a profit to the public and private sectors. Each foreclosure taken back by the bank has a direct effect on their profitability, therefore they are more willing to sell quickly to a Buyer for much less than is owed in order to avoid the escalating direct costs of having to pay attorneys, filing fees, contractor's, real estate agents, higher fire insurance premiums for vacant property, holding costs, and those hidden soft costs that put a dent in the lending bottom line.
SELLER WINS: For Sellers behind on their monthly payments, catching up many times is just not an option due to job loss or downturn, medical bills, divorce, estate inheritance, and most recently variable rate mortgages. If the equity in the home is just not enough to lower the sales price to the point where homes sell quickly in a Buyer's market, the Seller runs the risk of sitting on the market for several months and eventually finding their home on the auction block. The lender may offer options to the Seller to keep the home and work out a re-payment plan or modify the exiting mortgage but sometimes a sale is the best solution for the homeowner. This is where a short sale becomes very attractive. A foreclosure can negatively affect a credit score hundreds of points and prevent future homeownership for up to 7-10 years, whereas a short sale carries less damaging effects with a minimal FICO score impact and future homeownership possibilities as early as 12 months and in some cases sooner. Although the Seller is not permitted to receive any proceeds from the sale, the chance to start over many times is more than enough.
BUYER WINS: In today's Buyer's market discounts are deep, motivation is high, and these short sale opportunities pose to be the perfect tool for creating instant equity in a property for those looking for a bargain to mitigate the risk of slowing appreciation and stagnating home values. Short sales can realistically generate discounts as low as 50% and in some cases even lower depending on the motivation of the lender, condition of the property, condition of the market, and the shrewdness of the negotiating party representing the Buyer or Seller. For Buyers willing to wait more than 30 days to snag bargain basement deals, they are turning to this type of low hanging fruit.
REAL ESTATE PROFESSIONALS: Real estate professionals trained in the art of negotiating these deals can be the most valuable asset of the deal itself creating thousands of dollars in equity for the Buyer, saving years of credit impact for the Seller, and salvaging millions of dollars in profitability for the lender. Their commission is well earned and generally paid by the lender reducing the mortgage. If executed properly with a proven and successful system, the skilled agent will attract multiple offers per property at prices that the lenders must and will be convinced to accept. The mistake made by many not well versed in this high level of negotiation is presenting the lender with a low ball offer without substantiating the reduction by eloquently and thoroughly "selling" the deal to the decision maker. Real estate professionals are experts in their markets and in real estate transactions giving them the advantage needed to create the WIN-WIN-WIN outcome. Whether buying or selling at this level, using a highly trained real estate professional many times will be the difference between success and failure in a short sale.
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Jules Harper, REALTOR is a certified short sale/foreclosure specialist and Trainer with Keller Williams Realty. His course is designed for investors and real estate professionals interested in creating wealth through short sales. He also actively buys, lists and sells pre-foreclosures in Georgia. He can be reached at (404) 431-9230 or firstname.lastname@example.org. You may also visit www.webuyfourwalls.com.