Short Sale Agents Seattle - Real Estate Short Sales and FICO Credit Scores

Nov. 26, 2010 - PRLog -- Short Sale Agents Seattle

Real estate "short sale" is a new term of art that has entered the lexicon during what is considered the worst housing crisis in a generation.

A real estate short sale means that a homeowner sells his house to a third party buyer for less than the amount of the mortgage that he owes on the property. For example, Sammy Seller owes a first mortgage of $300,000 to Thrifty Bank. Sammy cannot pay the mortgage but rather than walk away and have the property foreclosed he puts the property on the market through his local real estate agent.

After some weeks of open houses and showing the property the best offer that Sammy receives from a qualified buyer is $275,000. Sammy takes the $275,000 offer to Thrifty Bank which sees the value in cutting its losses as quickly as possible. Thrifty Bank gives its OK and the short sale is completed.

Sammy avoids having a foreclosure haunt his credit rating for the next seven years. Typically, short sales appear on a person's credit report as "Settled for Less" or "Paid in Full For Less." Although the effect is still negative, it's not nearly as damaging as a foreclosure, which could send Sammy's credit score plummeting nearly 200 points, making it more difficult for Sammy to even rent an apartment. Incidentally, Thrifty Bank has no obligation to report Sammy's mortgage as other than "Paid" without any additional qualification. How a lender reports a borrower's short sale is open to negotiation.

Thrifty Bank avoids the legal expenses of foreclosure, and the ongoing management and economic expense of paying property taxes, mowing the lawn, and otherwise insuring and maintaining the property for an uncertain period of time while the property sits in its real-estate-owned portfolio waiting for a recovery in real estate values.

Sammy's story is the uncomplicated version of the real estate short sale. Twenty percent of completed home sales nationwide are short sales, said Guy Cecala, publisher of Inside Mortgage Finance. But it is believed that the number could be far higher if so many didn't get derailed with complications. Get Internet #1 - Short Sale Agents Seattle @ http://realestatecure01.webs.com and change your financial life forever!

A recent survey of 3,000 real estate agents conducted by market research firm Campbell Communications said nearly one third of short sales never make it to closing. Agents interviewed for the survey said mortgage servicers take an average of 5 weeks to provide answers on short-sale contracts. As a result, many potential buyers are walking away.

"Many of the sellers are so far in the hole that the mortgage companies are hesitant to accept what the market will bear, and end up forcing these would-be sellers into foreclosure," the survey said.

The complication arises because every party that has a potential stake in the sale of the property has to sign-off on the short sale or the deal is dead. Sammy's case was simple because he did not have a home-equity line of credit with another lender, or civil judgments, attachments or liens on the property. And Thrifty Bank held the mortgage loan in its own portfolio and had not sold it to a mortgage loan securitization packager.

Distressed homeowners who did not get their mortgages through more customer friendly hometown banks are facing a different kind of challenge. One man's distress is another man's opportunity, the saying goes. Domestic and international hedge funds who see opportunity are making bulk deals with mortgage lenders to buy all their distressed loans for 50 cents on the dollar, or even less.

Although experience shows that even these corporate lenders could get 80 cents or 90 cents on the dollar for their defaulted loans by facilitating individual short sales, these corporate lenders are opting to take the bigger hit and unload their entire defaulted loan portfolio in a single sale to a hedge fund or investment group. Mortgage brokers who made tons of money pushing loans to unqualified home buyers now make tons of money brokering those same loans to hedge funds.

The potential market is huge. A report by Zillow.com, a Seattle-based home-valuation service, recently found 29 percent of owners who purchased their homes during the past five years owe more to the bank than their house is worth. And homeowners who bought during the height of the housing boom in 2006 are in worse shape, with 45 percent of them underwater.

Not all of these underwater homeowners will end up in foreclosure, perhaps not even many of them, but an illness, a divorce, or a lost job can be enough to trigger a financial crisis that puts them at risk and tosses them into the short sale cauldron. Get Internet #1 - Short Sale Agents Seattle @ http://realestatecure01.webs.com and change your financial life forever!

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