| Often times when talking with a Seller they ask, "Why | | | | estate owned. The more REO properties held by the |
| would a lender agree to a short sale?" The short | | | | lender the worse it looks for the lender and the more |
| answer is, "It's in the lender's best interest." | | | | reserves they must carry. |
| Whenever a borrower stops paying on a mortgage | | | | Bank owned property is a headache for the lender. |
| that loan becomes what the lender calls a | | | | Now they have to cope with property maintenance, |
| "non-performing asset." It's a liability. It is money on | | | | utilities, and HOA fees. They then must list the property |
| which they are earning no interest and what's worse is | | | | with a Realtor® and pay a commission. They also |
| that they must now put back up to eight times that | | | | must insure the property and deal with the possibility of |
| amount in reserve. This is additional monies on which | | | | vandalism by the previous owner or others. |
| they earn no interest. | | | | If I am current with my mortgage, will the lender |
| Since earning money is what they are in business for, | | | | consider a short sale? |
| the lender stands to lose less money by accepting a | | | | Most lenders will NOT accept a short sale unless the |
| short sale. Then they can put the money back into | | | | borrower is delinquent. If you are only one payment |
| circulation to earn even more money. | | | | behind you may only be able to speak to customer |
| A study conducted in 2002 by Craig Focardi of the | | | | service or the collection department. |
| Tower Group estimated the entire costs of a | | | | In this declining market some lenders are considering a |
| foreclosure to the lender was $58,759 and took 18 | | | | short sale even if the borrower is current with their |
| months. You can understand why the loss of a short | | | | payments. If the borrower can demonstrate a true |
| sale is less than the cost of foreclosure. | | | | hardship and show the inability to make future |
| If the lender takes the property through foreclosure | | | | payments, some lenders are open to negotiation. |
| that property becomes bank owned. You have heard | | | | In my next article about short sales I'll discuss the |
| properties described as REO. That stands for real | | | | Hardship Test. |