The hassles of short sales have to be overcome to solve the housing crisis
The hassles of short sales have to be overcome to solve the housing crisis. A short sale takes place when a troubled house owner unable to manage the mortgage finds a buyer to purchase the property at a price that is shorter or less than the due loan amount. But to do so the borrower has to get the consent of the lender who has to agree to accept this short amount – be satisfied and not pursue the matter further. The trouble arises when it takes a lot of time for the lender to either agree or deny to the short sale. Often prospective buyers are not willing to wait for a definite period.
Having experimented with many measures to contain the foreclosure crisis there is a growing consensus among the housing pundits and economists that encouraging short sales is the only exit out of this mess.
Jeremy Brandt is the CEO of many firms that bring together agents dealing with short dales, investors and purchasers. He operates an impressive network of realtors dealing with short sales. Since the past few months has been getting many complaints about the holders of second liens – the banks.
During the housing zoom millions of people took out cash from their properties as home equity loans as well as lines of credit. Use was also made of piggy-back loans so as to avail of even lower rates of interest on the primary mortgage loans. Today many of these borrowers are in grave trouble with many having gone underwater – the worth of the property being less than the due loan amount. This blocks their escape route through modification or refinancing. The only option left is to go for short sales. Nearly 12% of the sales of residential units at the close of 2009 were through short sales as per the findings of National Association of Realtors.
If the house has two loans then for a short sale to take place the second lien holder has to give it up. If this does not happen then short sale cannot take place and the house slips into foreclosure. The first lien holder comes to possess the house because the second liens are subordinate to the first one. In brief this means that the second lien holder gets zero.
Thus the parties interested in a short sale will try to get the second lien holder to sit down to talks and parley for terms. Some kind of payment is made. This has become a trend with more second lien holders agreeing to it. It is all above board and legal.
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