Troubled Homeowners Turn to Short Sale, Discouraged by Slow Process

20 June 2008

Author: admin Posted under Foreclosure Filings

For many distressed homeowners facing foreclosure, an option that is usually considered after refinancing and loan modification, is a short sale. However, it seems that the process involved in this option is relatively slow.

To explain short sale, it is simply a transaction wherein a homeowner facing foreclosure sells his home for an amount that will not be able to cover the existing mortgage debt. But since sellers have the blessing of the lenders, they consider this option as the perfect solution to their mortgage problems.

Sellers will be able to avoid foreclosure and lenders will not need to spend on foreclosure filing. According to Clayton Holdings Inc, most lenders agree with this alternative because it saves them from losses that could be as much as 40 percent of the principal loan amount.

The only problem with a short sale is that it could tale months and months before the transaction is completed. This is because the lender will have to approve every detail including the final sales price of the distressed property. In addition, there are also short sale transactions that will involve several mortgage companies or secondary market. For lenders who are approving short sale transactions, the problem lies with the overwhelming number of distressed borrowers.

For some buyers, it could really be a turn off. They will need to wait a couple of months before they find if their offer is accepted or not. Some experts advise interested buyers to make their offers really hard to resist, if they really want to get their hand on the distressed property. Buyers should always keep in mind that lenders will want to minimize their losses.

Other experts are also hoping for lenders to become more flexible and accommodating in order to improve market conditions.