Future shock

Future shock

May 26, 2008

Grow your business—understand the short saleNathan Pascalforeclosures, bankruptcies, credit, attorney fees, legal notices
At this point, it should come as no surprise that there is an
influx of foreclosures and bankruptcies due to the volatility in
today's real estate market. With lending institutions folding and
financing options drying up, many borrowers have found themselves
in the position of having no other options than either going into
foreclosure or engaging in a short sale.
As a real estate professional, it is extremely important to
understand this scenario and be prepared when a short sale
transaction opportunity arises. Who knows, you may even develop a
specialty niche for yourself.
What is a short sale?
In its most basic sense, a bank will opt to work with the homeowner
to sell the property in lieu of foreclosure. This is what we call a
short sale. The "short" refers to the shortage in the sale proceeds
when the sale of the property goes for less than what is owed on
the mortgage.
Is a short sale a good option?
To many people facing this difficult situation, a short sale is an
excellent option. A short sale will allow a homeowner to avoid
further blemishes on his credit profile or face a potential barrage
of lawsuits and judgments. A short sale, in many cases, can help a
homeowner escape from filing for bankruptcy. Although the situation
is not ideal, it gives the homeowner a chance to save some face on
his credit and hopefully become a homeowner once again.
It is important to remember that banks are in the business of
selling money, not property management. They do not want to acquire
a property and become a property owner, with all the burdens that
it entails. Additionally, the obligation a bank assumes, known as
"real estate owned," represents a loan that went sour, which is not
something bankers want showing up in their statements. A short sale
is most favorable to the bank because it can report the debt is
Many times, a bank will even set up favorable terms for a short
sale balance. In addition, a bank is able to waive the costs of
attorney fees, legal notices, auctions, advertising, collections
and other expensive costs associated with foreclosing on a
Short sale considerations
Short sales are not much different from most purchase transactions;
however, there are some important considerations. It should be
noted that it is not uncommon for a short sale to take anywhere
from 60 to 90 days to close. Closing cost help is usually not
furnished; there are income tax considerations, and a poor
appraisal may stymie the process. A would-be buyer would also be
highly encouraged to employ the help of a strong home inspector
before moving forward, as many of these properties have been
subject to neglect.
With many potential obstacles to face, it would also be highly
advisable to associate with a strong, attorney-owned title company
that will be able to quickly, efficiently and thoroughly facilitate
all lender requests.
More of these potential situations are looming on the horizon. The
more research and preparation you do now, the more you will be
prepared to grow your business in the future. Align yourself with a
title company that is seasoned in these transactions and is willing
to educate and work with you. It will be worth the time you
invested in yourself and future partnerships.
Nathan Pascal is president of sales and marketing for Huntington Title & Escrow
LLC. He may be reached at (443) 738-1708 or e-mail npascal@huntingtontitle.com.