Reply by NJ_Notary on 2/21/07 8:39pm
Msg #176656
Short Sales
Hi Ewing:
Short sales are not uncommon, especially in todays real estate market. Ok that may be to broad of a generalization since no two markets are exactly the same; however, in my market they are on the rise again as I had anticipated. As a real estate broker I specialize in asset management with a range of REO, Foreclosures, Pre-foreclosures, Deeds-in-lieu, Workouts, and Short Sales. Many can not understand why a bank would let the property go for less than whats owed just to get it off the books and out of their portfolio. Here is a great example:
- the mortgagor/owner is 90 + days late on payments and a lis pendens is about to be filed. Take note: a lis pendens may have even been filed. It doesnt make a major difference becuase a late is a late. In short sale cases the mortgagor can not bring themself back to good standing for various reasons (which i wont go into, but theres not many I havent heard or personally seen- when you practice it day in and day out - just as most reo specialists have you've heard it all at one point or another or experienced it first hand- and on a side note asset management in the reo respect has some really weird stories and oddicies, almost tales from the crypt kinda). If the bank forecloses and takes the property back as an REO there are expenses that would be incurred for the bank to place the property back on the market. These fees include but are not limited to: attorney fees (depeneding on the attorney some reo attorneys structure a flat fee for bulk files or the traditional way of billing; regardless this is an expensive fee and well deserved might i add since the attorneys do do a good amount of time on each file), court fees, filing fees, municiples liens (ie city water/sewer/trash or more commonly real property taxes-is a tax foreclosure in the works in the near future? thats something that bank must ask itsself), municiple fines (ie citations, hazards, et.al.), Real estate broker fees, Cleanouts ( not many are broom clean - this fee can be anywhere from $1000.00 up to anywhere say $10,000.00- the average is about $2500.00). maintenance for lawn mowings, snow removal, etc., boardups, and other hidend expenditures such as lead based paint remediation and asbetos removal (which lead and asbetos are noooo way near cheap). Oh a few more fees I forgot to mention...eviction fees, cash for key offerings, sherrif's office commision, sherrif's sale bidder's fee, and rekeying the property. For the bank to foreclose properly and according to Fannie Mae guidelines its not cheap. Now you when look at the present market conditions, the condition of the property, etc. and the bank crunches the numbers its in their interest to do a short sale becuase they will be losing much less as apposed to had they foreclosed on the home. You also have to take in consideration the mortgagor's hardship as well. The Bank will have them fill out a financial report and hardship letter that they review intensively. A BPO (broker's price opinion) or as in other states where BPOs are illegal a CMA (Comparartive Market Analysis) and/or Appraisal is completed on the property.
The condition of the home may have been good when the property was purchased or refinanced; however, in its present state it may be in disrepair and in fair or more commonly poor condition.
This is just one of a few examples as to the "why". Sorry for a lengthy explanation. I tried to shorten it as much as possible and keep it as non shop talk as possible.
The moral its all about the crunching of the numbers.
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