Shortsale – Failing to Rescue

Look, it’s a bird, it’s a plane, its…..

Faster than a speeding bullet….

At some point in our life, each of us has tried to emulate a superhero.  In our childhood we probably sported some concoction of tights, a cape made of a dish towel and maybe even goggles that were actually a ski mask.  We’d skillfully put together our costume only to find that when we looked in the mirror we were in sorry shape to rescue anyone.  In fact, we looked just as though we were more ready to scrub the kitchen floors rather than protect all of mankind.

Well, for homeowners, the short sale used to be such a superhero.  It was a respectful way of sorts to bail out a troubled seller and the banks, while losing some money, were usually able to recoop more than if the house went into full blown foreclosure.

The LA Times published a piece this weekend highlighting how the shortsale fails to demonstrate superhero skills and has often become a stressful, long, drawn out process for all involved. 

For sellers this is a way to try and get out of a sticky situation without foreclosing, for the bank, they typically lose less money than in a foreclosure and buyers can usually nab up a good deal.  So what’s the problem?  Too many – the banks are overwhelmed and the system is just taking too long to get anything done.

According to the article:
   Once sellers have an offer, they must assemble a package to present to the bank, including a “hardship letter” explaining why they had to put the house up for sale — loss of employment, a spousal death, a divorce, a disability or a mortgage resetting, for example — and asking the bank to accept a short sale, according to a Countrywide spokeswoman.

And that’s only the first step in the process – the approval.  Mind you, this is after the sellers have already gotten an offer, which is no easy task in this market.  Then there’s the rest of the paperwork and waiting game.  Buyers are stuck waiting out fluctuating interest rates, the bank to approve counter offers, etc.  It seems the bargain hunter buyers often just get fed up with the long wait and move on to look for another basement priced property to buy. 

So for those of you on the hunt for a great deal or those of having trouble making your mortgage payments looking for a super rescue and are considering a short sale – it can be an excellent way to go, but it can also be a long frustrating process.  Be sure to consider all your options, hope for the best and prepare for the worst!