Simply because it makes business sense to do so.
One of the most common misconceptions that a very high percentage of homeowners have is that their lender is lying in wait ready to jump out and take their house. Nothing could be farther from the truth because foreclosure is very costly to the lender compare to other alternatives.
Reality is lenders are in the finance business not in the real estate business and they do not want the homeowner’s property. Whether the lender chooses to go through with a foreclosure or agree to a short sale, they are taking a loss either way, but in many cases they would take less of a loss with a short sale and resolve the matter in a comparatively shorter time frame.
For example, your property is worth$200K, you owe $190K, and you get a short sale offer for $180K. Assuming only 6% commission and 2% closing costs, your lender would net $165.6K and take a loss of $24.4K loss.
Let’s assume that rather than agree to short sale offer, you lender foreclose the property. According to Mortgage Bankers Association’s Lender’s Cost of Foreclosure policy paper – the loss is generally over $50K per foreclosed home or as much as 30-60% of the outstanding loan balance.
In your example case, 30%-60% of outstanding loan balance would translate into $57K-$114K. Even if it the loss is only $50K, your lender would still be able to reduce their total loss by more than $25K by accepting a short sale.
Did you know that nationwide short sale success is less than 15%? This is because most Realtors are unfamiliar with short sales and end up making many common short sale mistakes. Unlike most, Certified Distressed Property Expert designated Realtors have a success rate of more than 85%!
With your financial futures on the line, you need a specialist on your side. I urge you to contact MD Short Sale Real Estate today for a free short sale evaluation if you think short sale might be right for your situation. I will reach out to you right away to discuss your situation in strict confidence.
