Reports from The National Association of Realtors show that approximately one-third of home sales over the last few months have been either a foreclosed property or a short sale. The sale of a property for less than the mortgage owed to a financial institution is known as a “short sale”. In some cases, the remaining debt is written off by the lender, and in others, the borrower must make provisions with the lender to settle the outstanding debt. Theoretically, delinquent homeowners get out from under a mortgage they cannot afford, and the institution avoids the costly procedure of a foreclosure, even though they generally lose money in the process. The money lost on the short sale is usually less than the cost of the foreclosure option, so it has a decided advantage for the institution. The Treasury department is expected to announce a new policy that will encourage mortgage lenders to increase short sale attempts through a financial subsidy and provide standardized guidelines and procedures for lenders and REO professionals. The Treasury plan, which is anticipated to be instituted later this month, would give loan servicers a $1,000 “success fee” when a short sale is finished, according to short sale specialists that have seen a preliminary outline of the policy. The home owner would be given up to $1,500 to aid in relocation expenses, like the “cash for keys” program that various servicers are offering.

A short sale has been considered a stopgap measure to prevent a surplus of foreclosures for an institution, but recent trends have shown that fewer and fewer short sales are actually being approved or completed, resulting in the continued climb in foreclose properties in the marketplace. Some buyers have become frustrated with the process and choose to pursue other options because short sale transactions have been delayed for many months. This has been attributed to the lack of standardized procedures within the mortgage industry to manage these arrangements. Each individual institution may have its own set of policies, which presents a difficult avenue for realtors and their clients to pursue. Many lenders simply do not have the requisite staffing, knowledge and systems in place to process short sales in a suitable time frame for a buyer to take advantage of the bargain. Another problem is lack of experience and education among real estate professionals in working with these new marketplace options.

Here at Coastal REO, we are ahead of the learning curve dealing with short sales and foreclosed properties and recently completed a million dollar deal on a property in Myrtle Beach, SC. You can be assured that working with our team can prevent the time loss and potential revenue loss that comes with attempting to complete these complex transactions with an inexperienced agent. Contact us today to see how we can move forward with your particular circumstance.