Why must there be a Hardship to do a Short Sale?

Hi folks. Today I have mixed emotions. Lenn Harley has a great featured post today basically showing how asinine our Government has been by throwing away trillions of dollars to bail out banks while ignoring the true issue……lack of equity. According to Lenn (and I agree) we have an equity problem in this country. Until this problem is solved nothing else matters.

Homeowners will need to move or want to move at some point and if they can’t sell because they owe too much they are stuck. So they are forced to make hard decisions. Some will stay and stick it out but I’m afraid many more will just walk away and let their homes be foreclosed on.

In my opinion, this is going to be the next major waive of foreclosures. Right now it seems like things are starting to get better. In some of the hardest hit areas inventory is down and sales are up. Don’t be fooled. This is the eye of the storm.

Banks have been slower to foreclose and in fact, according to some sources, have more than 500,000 properties that they are sitting on. My guess is that this number is higher. These will be released to the market soon.

Now, I am a firm believer in meeting your financial obligations. I know I do. TLW and I sold several of our properties last year and had to bring large sums of money to closing on a couple of them. It sucked. But we did it anyway.

However, there are many people where bringing money to closing is just not possible. What would you do if you had a better job opportunity that would require you to move BUT you were upside down on your mortgage by 200 grand or so? A loan mod won’t work and you don’t qualify for a Short Sale. Do you just stay in your house? Or do you walk?

My question is…..Why won’t the lenders do a Short Sale anyway? Why does there have to be a hardship? Why can’t the hardship be that you are stuck in a situation that is not going to change for a decade or more? I mean let’s face it, at some point, MOST people will need to sell. Unless they have an option to Short Sale without proving a hardship they are screwed and we are screwed.

One of my Sellers received this today:

• I have reviewed the information submitted and the sellers do not qualify for any liquidation options. They are showing a large surplus income and they do qualify for home savings options. I need to know that they are interested in pursuing home retention and would need a rescinding of the listing so that we can proceed with home saving options. I need to know this no later than Friday, May 22nd.

That “large surplus income” is from the husband who makes about $700 a week and a wife who is on unemployment. They owe over $200,000 on a property that is worth $60,000. They have never refinanced. Hubby’s job relocated him to a different store and he now has to commute over 100 miles a day FURTHER than when they bought the house.

This property will now be foreclosed on even though I have a cash buyer under contract at a price higher than the property will be worth in a few months. This foreclosure, that is avoidable, will drag property values down even further in this neighborhood.

The owners credit will be shot, the Buyer misses out on a good buy, the neighborhood’s values will take another hit, I wasted 2 months of my time and the Lender…….will get some more money from us, the tax payers.

Does this suck or what?

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