Coldwell Banker Relocation Team

Foreclosure was looming for a Chicago home owner, after a divorce and the loss of a job made it impossible for him to make his monthly mortgage payments. So he decided to try selling his home as a short sale. It worked, and the home recently sold for $210,000. It appraised for more than $500,000 at the height of the market, he said. The icing on the cake: His lender, Chase, cut him a $20,000 check after the deal was finalized, an incentive the bank offered if he sold via a short sale, as opposed to letting the home go into foreclosure. "I don't think enough people know what's possible with a short sale," said the seller.

A short sale is when the lender accepts a lower mortgage payoff from a seller because the homeowner owes more than the home is currently worth. They're notoriously complicated to complete, but with more and more Americans underwater on their mortgages, they may be getting a closer look by lenders. "We're starting to see that servicers and lenders are viewing short sales as a better alternative than they had in the past," said a spokesman for RealtyTrac, an online marketplace for foreclosures. "Some of that relates to the fact that it's getting harder to foreclose. There are additional requirements in terms of paperwork and requirements that states and judges are imposing."

Short sales are gradually rising. This year, short sales are making up about 8% of total home sales, up from 7% in 2010, 5.5% in 2009 and 3% in 2008. Short sales are sometimes referred to as a kinder, gentler foreclosure. Borrowers never get evicted, you never have the vacancy issue for the home, so it's good for the market around it. Short sales also typically sell at less of a discount than foreclosures, and many say that a short sale is much less damaging to a homeowner's credit than a foreclosure.

The long wait

But often a short sale can't be completed in a snap. In general, it is a totally different type of transaction. You're not only selling a house, you're negotiating debt. Many short sales take as much as six to nine months to close, if they get to closing at all.

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Useful Information About Bellingham Real Estate
by Tom DeRose