Short Sales can save borrowers that are underwater as long as everyone agrees. Short sales are for homeowners that want to avoid foreclosure or for those looking for a great bargain, if all goes to plan.
Short sales are transactions in which borrowers owe more on their mortgages than their homes are worth, known as underwater, where the lending company agrees to a discounted payoff. In San Diego County 18.7% of the home resale market for the month in June was short sales, which is up from 2% we saw five years ago, states local real estate tracker DataQuick.
Short sales are growing, however, the process of the closing take time, is uncertain, and changes all the time, which can hinder interested parties.
Kurt Wannebo, a San Diego broker that has over 6 years of experience in short sales stated, “Short sales are changing all the time,” and went on to say, “The banks change their processes all the time … and there are new laws and new short-sale government programs.”
A new state law that was signed in July is meant to help protect short sellers may make the process even longer, more uncertain, and cost the seller more.
Who should use a short sell?
In most cases, those that opt for a short sell are ones that can no longer afford their mortgage and want to walk away as their investment is no longer there.
Shelia Brady and her husband purchased a condo in Rolando for $285,000 in 2004; the condo is now in escrow being sold as a short sale for $120,000. The couple not only lost value but also was behind on their house payment due to surgery that stopped her from working for 2 ½ months while her husband has been unemployed for 2 years.
Why would this couple use a short sell instead of letting the foreclosure process take over?
“You have such a strong moral obligation toward your mortgage,” Brady said. “You sign a document saying, ‘I will do this.’ ”
Greg Ives, 33, purchased a downtown San Diego condo at the Hard Rock Hotel to be used as a rental investment for $405,000. The value on the property depreciated and the amount he could charge for rent depreciated. Once he paid his mortgage, he found he was $1,000 under for several months. He filed for a secure loan modification but was denied, he then decided on a short sale. After five long months, the deal closed. He still owes the lending company and will have to pay $340 per month for the next ten years. He stated that his best option was a short sale. “I’m grateful to be done with it,” Ives said.
For any questions regarding selling your property via a short sale or if you are interested in a buying a short sale property, contact one of our expert real estate agents in the San Diego area.