Posts Tagged ‘REO’

Let’s talk about short sales. The definition of a short sale is to sell a home short of what is owed to a lending institution thereby making them lose money. Short sales are used when a home owner decides that their property is no longer worth what they paid for and they don’t want to go into foreclosure with their lender. The homeowner will list their property with a real estate agent who, upon receiving an offer, negotiates with the lender to get them to accept a deficiency on their loan. As you can imagine lenders are not fond of losing money so they fight with the agent and homeowner to not accept the negotiated price. It is up to the agent to prove the deficient value and up to the homeowner to show that they can no longer make the payment. This process is a lengthy one and can take up to 6 months, even more in certain situations. But this is a far better alternative than foreclosure for all parties concerned. The homeowner gets to stay in the house, sometimes without payment, the agent makes a commission, and the lender gets the property back damage free. President Obama, HUD, FNMA, FHLMC, and most servicing company believe that this is a WIN/WIN for all concerned. So why is it this not the preferred method for upside homeowners to dispose of their properties? Simple, most lenders are stuck in the old REO (real estate owned) days where the homeowner is foreclosed on and physically removed from the property by law enforcement. I will compare the two methods of home transfer, REO vs. Short Sale, next week.

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