The Newberg Graphic
| Are ‘short sales’ worth the long wait? |
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| Real estate -- Deals can stave off foreclosures, but the regulatory strings are many and the wait can be lengthy |
| By David Sale It may be a buyer's market in the real estate world, but for buyers and sellers alike, moving debt-ridden homes can be an unexpectedly stressful and time-consuming process. "It's a lot of work and banks are overloaded," said local real estate agent Kelly Hagglund, principal broker of The Kelly Group. She recently completed training as a certified distressed property expert in order to expand her realty office into the specialized market of "short sales." Short sales are deals that allow cash-strapped homeowners to close out their mortgage at the price that the home sells for ... usually lower than the full amount owed on the property. Such an arrangement can save many people from foreclosure and even bankruptcy, given plummeting real estate prices, but be forewarned: most short sales are anything but short. While a standard home sale closes in 30 days, "short sales take months and months to close," real estate agent B‚atrix Newman, principal broker of Yamhill Realty, said. "Most buyers just walk away." Despite the difficulties, such sales are on the rise nationwide, making up fully 20 percent of all home sales. In Yamhill County, nearly 100 properties are now being marketed as short sales, Hagglund said. "There's 84 that are third-party listed (by lenders), plus another 30 that are bank-owned - in addition to 368 that are presently vacant but without distressed mortgages," she said. "It's a lot." Because it involves taking a loss on the total amount due on the mortgage loan, not all lenders will accept short sales, especially if they calculate that it would make more financial sense to foreclose. For mortgage holders looking to get out from under their debt, the best time to seek approval to short sell their home is while still current on their mortgage, but after the market value of their home has fallen below the amount owed. Many homeowners, however, only consider short sales once they find themselves unable to make mortgage payments, Hagglund said. In order to generate more business, she and her agents have been contacting such homeowners to offer their assistance in marketing the property. "Some people have said we're being vultures - but we're trying to help them find a buyer before the property goes to foreclosure and destroys the owner's credit ...," she said. "Owners who are thinking about a short sale shouldn't wait too long - that can make matters worse." Even if a lender chooses to allow a short sale to proceed, they have no obligation to accept the first offer made - hence the frequent delays, Newman said. "Because the seller is still making mortgage payments, the bank is in no hurry," she said. "They're waiting for as many offers to come in as possible. For buyers, it's like bidding in the dark." The process can also get bogged down when homeowners have more than one loan on the property - such as a home-equity loan, second mortgage or line of credit - in which case approval for the sale must also be sought from the other lending institutions. Both real estate agents agreed that buyers looking at a short sale purchase should be willing not only to wait, but to come to the table with pre-approved financing in place. Homeowners should also seek the advice of a tax planner before making a short sale. Lenders may claim the unpaid mortgage balance as a loss on their taxes and issue a 1099 form to the homeowner; in other words, the forgiven debt could be taxed as earned income. "We have to deal with (short sales) as part of the market, but not that many actually go through," Newman said. "These days, there's a good chance that homeowners can negotiate reductions in their mortgage rate instead." "It's something that will be here a while," Hagglund said of short sales, also suggesting they shouldn't be ignored. "You can't just put your head in the sand." |
