Posts Tagged ‘Shortsale specialists’

Don’t Forclose! Do a short sale

By: Kyle Gulock

You can understand that a homeowner who has lost a job and is without income has to default on his mortgage. But more and more homeowners who CAN make their payments are still deciding to default and walk away if the value of their property has fallen to less than they owe. Seeing no future in making payments on a declining asset, they are throwing in the towel, packing up, leaving, and hoping to make a deal with the bank to forgive their loans.

Over 10% of more recent defaults are strategic. Higher net worth homeowners are more likely to adopt this strategic strategy. One study identified 12 million homeowners who may be facing or choose default in the next 3 years. About 20% of all homeowners are “under water” on value. Any homeowner who purchased or financed in 2006, 2007 or 2008 is likely to be in this boat. Nearly 10% of all homeowners were delinquent at the beginning of the year, and nearly 5% are somewhere in the foreclosure process. There are all big numbers, and are casting a shadow over any actual or hoped for housing recovery.

The banks can write down the value of loans to fair market value, and this helps the homeowner in trouble. But somebody has to pay for this discount, and that somebody is all of the other responsible homeowners who ARE making their payments.

A short sale is a solution that works for both bank and homeowner in the situation described above. Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.