In the US Real Estate glossary, thanks to the foreclosure fiasco, there is a new terminology “Short Sales” got included. Americans were not accustomed to foreclosures, as the real estate markets were trotting on even keel for decades. Property buying was an easy task when the economy was sound and healthy.
Owning a home is common American dream. Realtors were thriving on this dream – far above their counterparts in other countries. The hype in real estate activity of buying and selling properties was at its peak, till the end of 2005, where home loans were granted for the asking.
In fact the post-analysis of the entire foreclosure crisis, point out this as the foremost reason for bringing down the slide. The lethargy in not checking properly the repaying capacity of the barrowers, culminated into the disproportionate home loans being applied for and got by many people, whose credit history was questionable.
California State, considered as the paradise for home buyers, particularly the San Francisco Bay Area including major cities like the San Jose, enjoyed the peak business in housing markets during the boom years. With handsome home loans available for buyers, the property prices swelled to dizzy heights disproportionately in the Bay Area. Ironically it is this area, which is worst-hit by the foreclosure crisis when the boom was burst.
With a down sliding economy, the floating interest rates ballooned beyond the repaying capacity of millions of home owners. Result is – many home owners just blinked – when the repaying monthly instalments shoot up beyond their budget and walked away from their beloved homes, defaulting the repayment. They never imagined or were prepared for such a down-turn situation.
Now the statistics have become history. Millions of homes are available under foreclosure auctions. The real estate has become a buyers’ market, since they have many options to choose from. Nearly 11 properties are available from foreclosures, if any buyer searches for one suitable property.
However foreclosure is not the only end of this sad story. Instead of forfeiting their homes to foreclosures, the home owners can seek the escape route – namely Short Sales. By this process, the home owners can obtain the consent of the banks and lenders, of course with the help of a professional negotiator, for accepting a compromise.
On approval by the lender, the troubled home owner can sell off the property to private buyers. The home seller and buyer come to an understanding, where the sale price is mutually agreed upon and the deal finalized with the consent of the lender.
Although the price may not be equivalent to the mortgage loan amount or the real value of the property, this is the best solution in the disastrous circumstances following a foreclosure. The barrower-home owner gets their credit record tarnished and down-graded by many points. Their financial activities are crippled at least for the next 5 years. They cannot obtain a credit card, let alone buy a new house.
Further, the foreclosure laws of many States permit the lender to pursue the delinquent barrower, for the outstanding balance of the mortgage loan, even after a foreclosure sale public auction. In contrast, according to the latest guidelines issued by the Government, for easing up Short Sale process, the barrower is “fully released” from the mortgage debt, after a Short Sale is completed.
In a nutshell – if the home owner opts for Short Sale of the distressed property, the following advantages are there: The seller escapes foreclosure and saves his prestige and credit history; the lender gets back a major portion of the loan amount in quick time; hassles, expenses and headaches connected with foreclosure process are eliminated; unnecessary maintenance expenses for the lending banks to upkeep the deserted property are saved; and the buyer gets a good bargain on the sale price.
What else is wanted for those affected by the foreclosure crisis?