Dean Graziosi

Many of today’s investors are buying into the residential market.  Why not?  For buyers, the market has never been so favorable.  Borrowing rates are remarkably low, housing prices are down and sellers take every offer seriously.

Foreclosure rates are up and short sales are a way of life.  The Obama Administration is going so far as to encourage lenders and sellers to consider short sales.  The National Association of Realtors (NAR) suggests that as much as 30 percent of current contracts are short sales.

There was a time when the short sale was an insulting occurrence.  That is not the case today.  The short sale is an accepted transaction under Obama’s Home Affordable Foreclosure Alternative Program. 

The fact is that many of today’s buyers are under water.  Their mortgages exceed the appraised value of their home. Selling by way of a short sale is not ideal and the seller’s credit rating will be affected, but under the Obama incentive plan, the short sale has many advantages over foreclosure.

Experienced investors have their short sale qualification packages in place.  Early on in the real estate slump, short sales were nerve-wracking transactions that actually failed 40 – 50 percent of the time.  Banks were simply not prepared to take the loss and closing a short sale was never a sure thing until the actual closing took place.

Inevitably, the delays caused buyers to cancel contracts.  But, now banks are prepared and with cash incentives from the government to soften the loss, many lenders are now receptive to the short sale process.

The buyer needs to clearly state their qualifications.  Presentations are made more to meet the bank’s short sale decision-making body than they are to convince the stressed seller. 

Today’s realtors have been encouraged to take short sale education courses, sponsored by the NAR.  These agents can not only help investors put short sales purchasing packages together, but can also walk the offers through the acceptance process.  This does not imply that negotiations may not need to be involved, but at least the buyer will receive timely responses and closings can occur as scheduled.  Use an agent to have the best chance to put a short sale together.  

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Just three years ago, the terms short sale and foreclosure were almost non-existent in the real estate market.  Today, these two solutions for troubled homeowners are everyday terms that describe everyday occurrences.  Today’s real estate market is truly unique in that the slump is national in scope and affects homeowners at every income level.

The fact is that more than 50 percent of today’s transactions are distressed sales.  One in five homeowners would be facing a short sale if they were forced to sell at this time.  One in every seven residences has experienced some form of mortgage delinquency in the past twelve months.  More than one million homes will be re-possessed by the end of 2010.  Worse yet, more than nine million homes will receive foreclosure notices by the end of 2012.

Some homeowners are making strategic decisions to allow foreclosure. Many others are entering into short sales.  The weight of a foreclosure is hard to get out from beneath.  Today, sellers can have the credit damage of a short sale behind them in two years.  Distressed homeowners that opt to absorb the short sale are in much better credit positions than those that choose foreclosure.

With the assistance that is on the table from HUD and organizations like the Neighborhood Assistance Corporation of America, homeowners have choices.  It has never been easier to favorably modify a loan.

If modification will not work, concluding a short sale is easier than ever.  The National Association of Realtors has made short sale instruction an integral part of the real estate agent’s training.  The progress in putting short sales together has been remarkable.  When distressed sellers really know their options, foreclosure is the resort of last choice.

The good news for the short seller is that lenders are more receptive to short sales than in the past.  These lenders are not in the real estate management business and for the lender foreclosure is far more expensive than a short sale.  Distressed homeowners who are unable to procure a modification should be aggressive about finding a short sale buyer.  Take the emotion away from the transaction and focus on the future.  Conclude the short sale today and in two years the seller will be back in the marketplace.    

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