Oct 8, 2009
What Are Real Estate Short Sales?
In many parts of the country, home prices doubled during the period from 2000 to 2005. During this same time, creative financing programs (e.g. zero down payment, adjustable rate loans, interest only loans, option ARMs loans, negative amortization loans, etc.) gained popularity and helped some people buy homes who would not normally qualify based on their income, debt level and credit history.
Most real estate markets are now cooling, and some are even experiencing declining prices. In times of dropping real estate prices, the amount owed on a loan by some homeowners may actually exceed the value of a property. If homeowners cannot make their monthly mortgage payment, there is a potential for default on the loan and foreclosure of the property by the lender.
The term “short sales” is used to describe a situation in which a homeowner is at risk of defaulting on their loan, and the lender agrees to sell the property below the original appraisal price in order to avoid foreclosure. Most lenders do not readily agree to short sales, although exceptional circumstances such as a homeowner losing his/her job or the death of a wage-earning spouse may make some of them more open to doing so.
If a property is sold as a short sale, the lender recoups at least a portion of the original loan amount, the homeowner avoids the stress and stigma of foreclosure, and the new homebuyer gets a property below its original appraisal price. If a short sale doesn’t work, then the property usually goes into foreclosure.
Short sales may be an emerging trend as the rate of foreclosure is rising dramatically across the nation. According to Business 2.0 Magazine, the top 10 foreclosures markets are:
1. Greeley, CO
2. Detroit, MI
3. Miami, FL
4. Indianapolis, IN
5. Fort Lauderdale, FL
6. Denver, CO
7.Dayton, OH
8.Dallas, TX
9.Fort Worth, TX
10.Atlanta, GA
The credit of homeowners may be impacted after a short sale, but it all depends on how the lender reports the outcome. Some lenders report a partial loan repayment as full payment of the debt due, which does not adversely impact the credit of the borrowers. Other lenders report the sale as “settled,” which adversely and significantly impacts the borrower’s credit. The other problem is that the portion of the loan amount forgiven by the lender may actually count as taxable income by the IRS.
In summary, a successful short sale has some potential positive benefits (e.g., homeowners avoid foreclosure, lenders recoup at least a portion of the loan amount, new homebuyers gets a property at below the original appraisal price, etc), but there are also many negative consequences. Some of these potential negative consequences include: the negative impact on borrower’s credit, negative impact on the value of other similar homes in the neighborhood, and that the amount forgiven by the lender may be taxable event. Homeowners having difficulty making their monthly mortgage payment may benefit from talking to a real estate agent who is experienced in short sales.
Watch the video related to real estate financing
New Financing for South West Florida, mortgage information, how to handle short sales, multiple offers www.topagent.com
Help answer the question about real estate financing
I have bad credit is there any way to get real estate financing?
i mean actual money in my name real financing. not the so called creative financing way. Are there any grants available for people like me?
I just got keys to my short sale home.
We originally made our offer in October 2008. Yes, I know. We finally go the verbal that the house was ours in February. All paperwork was done in late March. Its a HUGE and LONG process. Its not easy at all. My husband and I were so frustrated that we thought of backing out several times. But we didnt, because it was a really nice home. In the end it paid off. If its worth the wait, wait it out. 
The article in the newspaper said that your score would go down to 600 after a short sale. That surprised me. If you were not behind on your payments, why would anything be reported to a credit agency. But it seems to be true..
Dont worry, soon you will regognize how bad you just got fleeced by purchasing that drivel and will have plenty of your own negative comments running through your mind.
I will tell you this about real estate: it is cut throat and people will screw you 6 ways to Sunday. Anybody who says that ain't true is a liar. That's another thing… for everything someone tells you in real estate, there are 10 other people who will tell you 10 different things.
I'm glad you seem honest and I wish I could help you with this but all I can tell you is they are all thieves and you have to watch what you are doing.
First step is to stabilize your cash flow situation with the 8 properties. You may have to refinance and/or increase rental incomes. You may have to dump some of the properties if absolutely necessary.
If you then still want to invest more, work with someone who knows that particular Real Estate Market inside and out and has years of experience. This is a Real Estate cycle that has happened before but this one is going to be rough and long lasting. You need to Know what your doing.
I would recommend trying to get Chris Harris from http://scbuyshouses.com
to mentor/coach you.
Their company buys/sells property Nationwide and are very fluent in the short sale process.
Very good market to get into!! Great choice!
Short sales can turn good deals into Kick A$$ deals.
Not only can you get a short sale for the listed price, you can get it for less often times.
Location makes a difference, but in most markets, there are record foreclosures, and a glut of unsold houses on the market. Short Sales are adding to that mix.
I can guarantee that the Realtor you spoke to represents the bank on the properties she advised you about – matter of fact just ask her if she represents the banks on any short sales. She is required to disclose if she is. I would be willing to put money down that she is. Matter of fact, if you would ask tomorrow, add that detail under the "add detail" option on your question tomorrow – I am curious to hear the Realtor's answer.
Remember, the Realtors job is to sell houses – they only get paid when a property sells. And the more it sells for, the more they get paid. Therefor, I would take their advice with a grain of salt.
If you are looking for a great deal, then you need to be willing to make low ball offers and get a few rejections.
"If you do what you have always done, then you get what you have always gotten."