More homeowners turn to short sales

Fannie Mae, Freddie Mac and lenders have made the process easier for borrowers who are willing to give up homes they can no longer afford.

By Teresa at MSN Real Estate Mar 12, 2013 12:23PM

© fotag/Getty ImagesThe number of foreclosure sales is on the decline, and that’s partly because the number of short sales is rising.

 

A short sale is when a homeowner sells a home for less than the mortgage amount, with the consent of the lender, which often forgives the rest of the debt in exchange for the homeowner's cooperation.

 

A short sale can be easier for the homeowner, who can time his or her move, and for the lender, because the home is usually occupied and kept in good repair until the sale.

Some lenders have even offered homeowners money to do a short sale.

 

According to RealtyTrac, short sales of properties not in foreclosure made up 22% of home sales in 2012, with the number rising significantly toward the end of the year. That doesn’t include properties in foreclosure that were sold as short sales.

In the last quarter of 2012, short sales made up about a third of transactions, with foreclosures making up only 11% of deals, according to RealtyTrac’s numbers.

"The national mortgage settlement is definitely contributing to the rise in short sales," Daren Blomquist, vice president of RealtyTrac, told Bloomberg. "This report shows there are still a lot of distressed homeowners out there needing to sell."

 

Short sales that were in the foreclosure process sold for an average of $129,817 less than the mortgage amount, while short sales that were not in foreclosure went for an average of $81,621 less than was owed, according to RealtyTrac’s numbers.

Lenders are also improving their performance on short sales, making it possible for deals to close faster. Fannie Mae and Freddie Mac, which must approve short sales of homes on which they backed the loans, also have made the process easier.

 

For many homeowners who can’t afford to keep their homes, a short sale is a good solution.

 

Cesar Rivera bought a home in Phoenix for $290,000 in 2003, but after he lost his job and got a divorce, he had trouble making the payments. He ended up doing a short sale for $220,000. It was "a huge ton of bricks off my back," Rivera told The Wall Street Journal. "I’m just relieved."

 

 
40Comments
Apr 29, 2013 6:30AM
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What about homeowner associations stuck with a vacant property in the complex?  The HOA can't get any dues for the property except for 6 months worth and often it is vacant for years.  The bank takes possession but does not pay monthly fees.  They don't list it for sale either, so people who want to buy it can't find out who to talk to.
Apr 3, 2013 6:23AM
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To Ronnie Bandit:  I don't sit here showing off what I have!  I am stuck now b/c I fell and broke my back and have 6 surgeries b/c of it and cannot physically move at this point.  To top it off, the neighborhood is not what it was supposed to be b/c owners are renting to anyone.  Mostly, trash!  I didn't get this condo with no money down, I put $40K on it in 02/06 and now have basically lost that money as the majority of the condos are now going for in the 70's and 80's.  That makes me sick as I just tore up the $40K!  I am a no frills person but have better morals than what is living in here now.  The $280.00 condo fee is killing me as I don't know what our Board is really doing in here to show the money.  I wouldn't care about renting.  It wouldn't cost me anything to fix something if it breaks.  I love my condo.  I can go in and shut the door and am comfortable with being inside.  I am just sick that I invested in something that was falsely presented to me now.  I struggle each day, both physically and emotionally.  I suffer with alot of pain too.  I think that we regular people know more than our congress know.  These people talk a good game but don't know what goes on at our level.  I feel for everyone in my boat.  Alot of us just have to suffer in silence b/c no one hears us!  Going through processes with Social Security disability, food stamps and such is like mountains of red tape and like trying to get an appt. with Obama!   Even if we got a petition going, it wouldn't matter.  We are the ones hurting and basically screwed. 
Mar 30, 2013 7:04PM
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I thought short sales meant Shorts sales.  They say when the economy is good, more skin shows.  I was hoping more shorts were being bought and worn.  Oh, well....I guess the only folk doing well is Congrress and I sure don't want to see them in shorts!!!
Mar 30, 2013 6:22PM
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We can all thank Clinton for this mess. Not everyone should be a homeowner with no money down, and terrible credit. Walk away as if you are breaking a lease, no skin off you back.
Mar 30, 2013 6:15PM
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wow...  wow....   does  this  sound  like  the  housing market  is   anything  close  to  good?  looks  to  me   like  someone  is  getting  a  kick  in the  rear... and  its  not  the  homeowner...  the  lenders     are
Mar 30, 2013 2:43PM
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If you have to do it..do it...but, you wind up with bad credit years and can't buy another home for at least two years...it's fine if you just want to rent somewhere...pros and cons.
Mar 30, 2013 2:16PM
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I did find where Chase bought the remaining 16 Billion in asset of WAMU for 2 Billion so you do the math, so about 12-13 cents on the dollar. Plus WAMU suide the FDIC for13 billion for allowing that purchase to happen, politics took over they say for the better good (the Rich)
Mar 30, 2013 1:57PM
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B of A, Chase and others bought the WAMU and Country Wide Loans for pennies on the dollar. Then when they short sale them these bank institutions claim a loss in the billions. This is so Wrong! For you short sellers ask what these institutions bought your loan for? They will not, they sayit is nothing to do with your loan between them and WAMU and B of A. I bet the short sell is for more than they bought the loan, and at the end of the year they will send a 1099 to the short seller. The seller takes the capital gain and the bank takes the loss, when actually the opposite happened. Worst of all the Goverment allows it. This is fraudulant and criminal. No one can answer this reason for that info is not available.
Mar 30, 2013 1:43PM
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  Income distribution at its best!  taxpayers getting hosed again?  ( i paid my FULL morgtage!) these bumbs pay no Federal Income tax?  before all u entitled brats complain, the Key word is 'Personal' Federal Income tax; 

  Sure glad I am not going to be around in 20 yrs;  It is not going to be prety when all the rich peoples money runs out??  (pescos % dollars of the 90's anyone?)  gonna be a rough ride for all U spoiled bratrs; it is called REALITY!  ha; 

Mar 30, 2013 1:27PM
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Its all just a scam people!The second housing bubble is gonna burst soon enough.There are more empty homes in your neighborhood that the bank does not want to even admit too(gotta keep em off the balance sheets).I believe they will drop even more when Banker Ben stops printing cash to prop up the econmy.And when he stops and inflation hits...property values drop!!And to all you refiers and new loan holders,when they take away the Mortgage Interest Deduction on your taxes, there will be no place to hide!!! Homes are no longer assets,they are government taxable liabilities!!
Mar 30, 2013 12:40PM
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Never say never. This could happen to ANYONE! Do not be so smug to think you will never be in a desperate position. Most people who resort to Short Sales do this because they have run out of options. I know physicians whose income has dropped 1/3 even though the volume of work is increased. Obamacare has hit. I know engineers who have been cut back to 30 hours a week. None of these people saw this coming. They assumed like the rest of us that housing would be their nest egg investment. WRONG!
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I think these homes should go to families that are interested in living in the home instead of these investors.  2 years ago I went through this and finally spent more on a home than I wanted to because of all the investor cash offers.  My house wasn't low enough for the investors to be interested in.  I bought the home to live in, not an investment.  Now there are several homes on my street that are rentals and we all know how they will be taken care of.  One looks like a dump already.  Now this will not help my property value.
Mar 30, 2013 8:31AM
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...why are we subsidizing people who enter a legal contact and then don't honor it.....

 

Can I get a short-sale on stock that I bought two years ago??

 

Yeah, I paid $100 per share and have 2000 shares- I paid $200,000 for the shares....they are now worth $89,000. Can Obama cover me for the loss of $111,000 like he is for millions of home owners??

 

Why not??????????????????

Mar 30, 2013 6:51AM
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HSJ123

 

You have hit the nail squarely on the head. Collusion is rampant between banks and realators. I find it odd that a broker will not return a phone call when I am calling to put an offer in on a house. A cash offer with the earnest money equal to the full asking price of the house!!!!!!

 

Class action suit anyone?

Mar 30, 2013 5:50AM
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USA88,you are so right.My heart goes out to those who are stuck in this housing market.Been there myself,rentals aren't any better because that's even getting out of hand.It's easy for some to say the economy is getting better because they're probably young and don't realize that when they hit the ages between 45 and 50 they too,will be out of the job market in order to make room for the younger job seekers.
Mar 30, 2013 5:40AM
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listings agents and banks are releasing short sales to only their freinds and family. I have called on several short sale properties now and the listing agent says that the bank is not responding, or it is already under contract when it is does not show under contract online and neither has under contract board up on the house. Listing agents are refusing to even take an offer on the home. This has consistently happened with on last 4 short sale/foreclosed properties that i saw. I am making a list and will check the final sale price and probably sue them later for not taking my bid which could have been higher. Since, no real seller has vested interest in these properties, it is for that reason bank officials and listing agents are scamming on these properties and selling for so less compared to maket rate. This needs to be investigated and procedures setup, otherwise mortgage holders are going to loose a lot on this.

Mar 30, 2013 5:04AM
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I am on disability and am struggling both financially and physically.  My condo which will sell under the current market for what I owe and am hearing that the ones in here are selling for at least 20K to 30K under what I owe which is not alot according to todays prices.  It is the HOA that is hurting me and really am not able to pack up.  I would like to do a short sale to get out from under.  Would this hurt my credit enough to hinder me from at least renting an apt?  I need to take this weight from off my shoulders as the stress is not helping my other physical problems.   Need some advice please?
Mar 30, 2013 4:15AM
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Is it possible to get approved for a short sale without a "hardship" like the divorce/loss of job mentioned above.  The neighborhood has gone down in value by at least 60 to 70%.  The balanced on the loan is over $110,000 but the best price to expect for a sale is $60,000.  There is now crime in the neighborhood and drugs etc. I am afraid to continue to live there with my children.  My loan is current but I know that it has to be delinquent to even hope for a short sale approval from my lender.
I am not in a financial position to keep the property.
Mar 30, 2013 1:14AM
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They predicted in 2008 that it would take years for the back log of underwater homes to end up settled not even counting the millions of homes that had balloon payments due in future years. Hopefully the experiment of no down loans is over. What goes up can indeed go down. No one I've ever seen has ever said the housing market has recovered, it will take many years. Improving doesn't mean it's back to normal. Hard for anyone who reads to claim the media doesn't report every blip up or down on housing.
Mar 29, 2013 11:31PM
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The economy has not recovered, especially the housing market. The Government and Media are lying going back and forth spinning tales but at the end of the day the economy is in the pits.
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