Jack's New Hampshire Real Estate Blog

What to do when you are UPSIDE DOWN
October 3rd, 2008 8:21 PM

In the early mid 2000's most of the homes were bought with near 100% financing.  In addition, many home owners pulled cash out via refinancing and equity loans.  In 2005, the New Hampshire market began to slow down and property values declined.  Now, values have decreased so much that nearly half the homes are UPSIDE DOWN, meaning that what they owe on the mortgage is more than what they would net from selling their home.  As a result, some homeowners are stuck!!!   Well, maybe not........... 

One option is a "Short Sale".  Before it was popular, I taught "Short sale" techniques to investors and my fellow real estate agent collegues through seminars.  Short sales used to be just another "tool".  Now, it is a must have skill.  So what is a short sale?  A short sale is when a lender allows a seller to sell the property by reducing the amount of money they will accept as a payoff.  An example would be:

Market Value of house...   $200,000

Loan Balance..................$250,000

Cost to sell......................$15,000

After paying commission and transfer tax and other expenses, the seller would need to write a check for about $65,000 just to be able to walk away from the house.   In a short sale situation, a "short" payoff of $185,000 is negotiated so the home can be sold for $200,000 and expenses are paid.  The bank accepts the $185,000 as full payment and the seller moves on.

So why would the lender do this?....  The answer is it is strictly business!!  The bank knows that if the property goes to foreclosure, they will have to incur even more expenses and carrying costs and will have to take the property back.  If they foreclose and are lucky enough to get another buyer, they will net LESS than the $185,000 after expenses as they will have additional costs.  It is their best interest to accept the payoff rather than taking the property back.

So who qualifies for short sales?  People who have gone through a financial hardship.  Exampes include; divorce, health issues, bankruptcy, family issues, relocation or any unexpected major life issue that arises.

Short sales are effective, but need to handled by a professional who specializes in them.  There are many tricks of the trade that make a huge difference on whether or not it is successful.

My best advice for short sales (besides calling me...lol) is to get an offer in to the bank early.  The bank takes 60-90 before making a decision, so get a buyer's initial offer to the bank as they will not work on the file until there is an offer.  In short sales, any offer is a good offer!! 

If you wold like additional information or assitance on short sales, go ahead and email me.

Remember...You are not "stuck" in your house!







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Posted by Jack Lavoie on October 3rd, 2008 8:21 PMPost a Comment

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