Tuesday, September 8, 2009

Short sale vs. foreclosure

A friend from another state contacted me over the weekend.  There has been a house for sale on her street for a long time and she was disappointed to learn that the bank had just turned down an offer for a short sale.  How could that happen, she asked.

Very simply, a short-sale is a sale that occurs because the lender has agreed to accept less than the amount that it would take to pay off what is borrowed against the home.  It is often a first step before foreclosure and the lender would consider taking less because the borrower has fallen behind or no longer has the ability to make the required payments.

So why would a lender turn down a short sale offer? What comes to mind first is that the borrower isn't behind in payments or that he has the ability to pay even though the payments might be creating a hardship for them.  The lender in this case might need to work with the borrower to reach an agreement on what a short sale means to both.  It really isn't fair to the lender to take the hit if the borrower has the ability to pay. 

The next reason that comes to mind is recovery.  Maybe the real estate market in this community is showing signs of an upswing.  What they might have accepted as a reasonable offer last month may not be the same this month. 

But in all fairness, if this home is truly on its way to foreclosure, I would hope that all parties would work together to limit the burden to all that a foreclosed home causes.  Foreclosed homes have both pros and cons for buyers and sellers.  Take a look at some of them at my website NJ Homesource.

If you want to learn more about buying a foreclosed home, please give me a call at (609) 658-2612.  We'll discuss the possibilities and learn together if it is for you. 

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