In an article published in THE STREET, we learn that some of the largest lenders are taking more of a shine to short sales as an alternative to proceeding with foreclosure.
That is good news for distressed homeowners who have a lot to lose in a foreclosure, including a death-blow to their credit and the prospect of not qualifying for a mortgage in the next decade. A short sale will blunt some of the credit hit and a person will at least be eligible for government backed mortgage products in two years.
Banks are finding out the hard way in places like New Jersey that the courts are on to their many faceted games meant to reclaim homes quickly and efficiently through foreclosure. With the ghost of robosignings past haunting their current efforts the banks know that foreclosures will not come easy in the Garden State, though they will come eventually if homeowners bury their heads in the sand.
The question is, why would a bank prefer to short sell a house rather than just foreclosing and owning it outright. Simply there are a few reasons.
First, as I stated above, the courts in New Jersey are slow to move toward foreclosure. NJ has one of the strictest tenant anti-eviction laws in the country, how do you think the courts feel about people getting kicked out of houses they own?
Second, the Banks have no interest in owning a bunch of empty houses across the country. They know that these properties are invitations for squatters, damage, theft of copper pipes and wiring and well, general mayhem. The state law is a bank which owns a property must maintain that property and many of the towns I work in hold them to it. That is $$$ flying out the window.
Thirdly, a short sale provides some money to the lenders/investors so they can move on to better investments with at least something. In a world where I lost 10% of the value in my retirement account over the past three days I guess getting 80 cents on the dollar now instead of 50 cents later is still a good deal.
Why would a distressed homeowner short sell instead of riding it out until the bank finally takes the place?
Is that a day you want to live? The day the sheriff’s officer comes to tell you to get out or go to jail? Some days are just a disaster, when you want to go back to bed (and probably should to cut your losses) and read Alexander and the Terrible, Horrible Very Bad day to compare your last few hours with old down-on-his-luck Alex.
If it were one day then maybe waiting around would be worth it. But this day from hell has friends who also want to crash at your place. There is “the day your boss and former boyfriends/girlfriends read that your house is up for Sheriffs sale”, which might happen a couple of times for good measure. Another day will be, “strange people snooping around your house day” to evaluate the investment or as representatives of the lender, great people to have around your kids, trust me. A bunch of other days will be “scam artist menagerie day” as every snake oil salesman within 50 miles comes to offer you illegal too good to be true plans to beat the banks at their game. Remember these lenders are playing with House (and Senate) money. If they can get bailed out by the Federal government they are not going to fall for unemployed used car salesman guy’s foolproof ideas.
Also consider what I wrote above, 2 years and you could be back in the game. Manage your money right, get some money together to put down. OK, maybe 2 years is a little too soon to get back on that horse. How about 3? 5? 7? With a short sale instead of a foreclosure you have that option.
In the end it pays to look at all of your options. I am a real estate attorney who thrives on helping distressed homeowners get out from under a weight that may crush them if they do not act and act decisively. My best days are helping people restart their lives. I encourage you to call me at 856-385-7081 for a free phone or in person consultation. So much to lose if you don’t act and quite a bit to gain if you are willing to face this chapter of your life with a little help.
Jim Schroeder
www.southjerseyshortsaleattorney.com
