Short Sales: Who Walks and Why??

Short Sales - Who Walks and Why?

Recent reports have spent a lot of time and effort relating the pros and cons of short sales and other real estate investors, bankers and brokers that dare make a "profit" from short sales but little attention has been given to who walks away from a home and way. Understanding the various profiles can help clear up the confusion while differentiating fact from fiction when it comes to short sales. Here is a short tutorial on who walks and why...plus a few tips to keep in mind when working with each situation.

The Misfortunate - There are always unfortunate situations and circumstances that wreck havoc on people's lives. At the top of the list includes disability or severe illness, divorce, job loss and other life situations which are either too large and significant for the family resources to deal with or which were not planned for in advance. Either way, the cost of keeping a house may become one more additional burden in an already bad situation. Short sale investors are often a very real salvation for those in the midst of a life crisis. Understand what their needs are in order to create a win-win situation which benefits all involved.

The Professional "Victim" - While legitimate misfortunate events and situations take place, some people simply learn how to use the system for their own benefit. For instance, the media ran a series of popular reports earlier in the year showing how average homeowners were unable to make their mortgage payments; one of the featured examples was a woman who had purchased a home ten years ago then refinanced every time her home went up in value. The original 15 year mortgage (which would have been paid in full if she had made one additional payment per year and resisted the temptation to use her home as an ATM) ballooned into an unaffordable monthly payment of quadruple the original cost due to her buying cars, vacations, furniture and other items via taking cash out every step of the way. While there is nothing wrong with living large - when you can legitimately afford it - those that live beyond their means count on the fact someone else will eventually get them out of the bind they are in. Short sale investors are increasingly the only solution to their woes - banks, brokers and others simply can't keep up with the sheer demand.

The Gambler - Speculators are likened to gamblers that place a bet. Sometimes you win, sometimes you lose but either way there are times the gambler just needs to cash in their chips and walk away for awhile. Those that got in over their heads may need to unload the excess, streamline the portfolio and manage their margins in order to play the game another day. While many short sale investors are leery of doing business with another speculator - depending upon the fundamentals used to purchase the property in the first place these can often be especially attractive ventures. Often the seller is savvy enough to consider creative deals and may have bought below market value to begin with.

The Bottom Liner - Another interesting group of people is beginning to emerge; the bottom liner. These conservative, financially responsible people bought below their means, made payments and are not facing a major life crisis...instead, the surrounding property values have plummeted so much that they realize the house would have to be held 8, 10 or even 15 years to break even. Increased property taxes and HOA fees - increasingly subject to hefty increases to compensate for those that are vacant and non-paying - are further impacting their bottom line. By walking away they can cut their long term loss. Plain and simple, it's purely a business decision. Keep an eye (and ear) open for these sellers; their properties tend to be in good order and they are wiling (and able) to make a deal.

See you on the other side!

Charles Gardner-Real Estate Investor

http://humble-homz.com