Unfortunately, our firm has begun to receive calls about negotiating short sales or to contact lenders about whether they will take a Deed in Lieu of foreclosure.
The arrival of the short sale validates the growing concern people have about the 100% Loan-to-value loans that many subprime lenders have made. The freewheeling days of crediting back $25k of the purchase price back to the buyer for "repairs" is coming back to bite lenders and homeowners now that house prices are no longer soaring. That is not to say that I am an alarmist, or that house prices are not rising at all. As always, the location is the biggest factor. Our clients in the Los Altos, Cupertino, Palo Alto area are not experiencing price drops.
Instead, the deflated values seem to be more often investments in Contra Costa county, and out near Tracy, in the San Joaquin county.
When homeowners have found a buyer and they and their Realtor would like us to negotiate a short sale, there are many factors to consider. Obviously, no lender wants to increase their REO portfolio. Accordingly, they may entertain a marginal discount. The deeper the discount, the more problematic the loan. Furthermore, the lender will need to see if junior liens have accumulated behind their loan. The more debt behind them, the more likely that they will REFUSE to take a Deed in Lieu.
What could be on record? I have blogged in depth on this topic. Other home equity lines of credit, judgment liens, medical liens and on and on.
Your friendly neighborhood real estate attorney--looking out for you!
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Julia,
In Florida we are taking the lead with the highest increase of Foreclosures in the country. I have been trying to educate myself in the subject, I will be taking a class at the end of the month on how to help clients that are in default. Thanks for sharing your thoughts on the subject, if you have anything else to share I will be happy to read it.
Julia-
We are having similiar problems in Illinois. I spoke to one lender about a "deed in lieu of foreclosure" and they thought I was nuts. The banks are not in the business of taking care of properties. I've had a few situations this year where my sellers are hoping to get a short sale approved. I think the general public who find themselves in this situation should also educate themselves on how long the foreclosure process takes and learn that the lenders want to work with them, if possible.
Again, the main factor seems to be whether or not the borrower has accrued more debt behind the loan. The MORE debt behind the bank, the more important it is for the bank to conduct the foreclosure sale in order to wipe out the junior liens.
It seems to me like banks would implement new programs, departments to help borrowers in preforeclosure, understand their options and negotiate the terms or something. Come on banks, lets keep it innovative.
Julia,
I was reading your blog and have a question for you. We get phone calls from California asking if we can bring our Short Sale training program to California. It seems to be the expectation that nearly all short sale training classes are held for free throughout California, BUT the agents end up being "SOLD" a product or something that is thousands of dollars. Has this been your experience?
Prior to bringing our training program to Tucson, Phoenix, and Las Vegas over the past few weeks, we we're getting the same response, BEFORE we showed up to those respective areas. The agents said prior to the class that they had attended at least 5-6 short sale classes and left with little to no substantive information.
During the Short Sale Solutions class offered by America's Home rescue, the agents said that, within the first 30 minutes of the class, they had learned far more than what they learned at all in the other courses. We want to know what your experience has been with the classes you're taken, especially in California. We're about to show up to California and we've been told that we have a bit to overcome in terms of the agent's perspective on what is and isn't good quality short sale education. In other words, we're being requested to "Clean up" all of the misunderstanding of what has been taught throughout the highest foreclosure areas in the country, including California, Arizona, and Nevada. Please let us know what you have experienced, in terms of the short sale education in your area.
Thank you
Michael Spickes