Quote:
Originally Posted by BGCarrera32
I found the house online today and he's in short sale.
|
I don't understand that sentence, I'm not sure how you could determine if a house is being sold short from an online search.
When a loan is defaulted on, the first step for a lender is to begin the foreclosure process. This begins by filing a Notice of Default. That starts the foreclosure process, which takes several months (at least).
A "short sale" is not a formal process. All a short sale means is the bank is willing to let the owner sell the house for less than is owed, and the bank agrees to accept that amount as satisfaction of the mortgage in full. It's just an agreement between the owner and the bank.
Banks have thus far been somewhat hesitant to do short sales, and instead have been relying on the traditional process of foreclosing on the house, taking the house back, hiring a broker and selling it. I think one of the reasons for banks preferring that method is it leaves less room for "second guessing."
If the bank voluntarily accepts a short sale amount, someone could always say the number was too low and the bank should have foreclosed to minimize its loss. Because there wasn't any real marketing of the house by the bank to determine a market value. Etc. That's one of the reasons it takes so long, there are appraisals, decisions no one at the bank really wants to make, etc.
From what I've read, many believe that short sales will become more streamlined and common at the banks, as the defaults continue to pile up and REO inventory continues to build. It is a quicker way for banks to deal with defaulted home loans.