Why would a lender foreclose on a property rather than accept a short sale?
This is a BIG question these days from Orlando buyers, sellers and real estate agents in the frustrating market where almost every home is a short sale. I posted this question on a networking website recently and these are some of the answers that were obtained.
With short sales usually comes debt forgiveness - maybe the borrower wasn't deserving of debt forgiveness. Maybe there is PMI - like all insurance claims the loss has to be a certain amount before they can make a claim. Maybe it is that the processors were overwhelmed and couldnt get to it. Maybe it is denial about the market. Maybe they didn't think the short sale would go through at that price anyway b/c of appraisal issues and therefore they didn't want to stop the foreclosure process just to start it over again when that sale fell apart. And maybe, just maybe, it won't make any sense even when you do know the answer. From Vicki Chrisner, Agent in Dulles VA
Simply put, the loss mitigator or short sale negotiator felt that a better offer would come along. They simply look at the math and often ignore BPO's and focus on the highest comparable sale and the outstanding mortgage owed and fail to take into account the buying public's perception of the value of short sales. They are very disconnected from the realities of the market and are often overwhelmed by the volume of short sales. From Carmen Di Biase, Agent in Rockland County, NY
There are rules for short sale just being upside down is only one and truthfully one of the smallest. The seller has to have a hardship and that means they can not pay you can not get a short sale if you have the money in the bank to pay the difference. In a short sale the remaining balance is forgiven; not so in a forclosure. The bank is able to go after the assets fo the former owner for the difference so they can take less in a foreclosure sale. From Heidi Everett, Agent in OK
So there you have it..there are reasons behind the madness..but that does not mean it is the BEST thing to do in order to turn this real estate market in the right direction. Want to learn more about the short sale process, foreclosure process, or figure out what options you have available to you? Give me a call today, Debbie Irons, (407) 908-2890.