Due to the recent massive mortgage settlement that was reached, the occurrence of short sale and loan modification options has increased steadily. However, each option has a distinct effect of the real estate market. Research shows that a high percentage of the mortgage settlement has been dispersed to aid in the form of short sales. Many housing markets have experienced a noticeable increase in short sales. This is especially true for most of California. More than half of the credits in California have been through short sales.
The increase in short sales has helped the real estate market recover quite a bit. No matter what your stance on the mortgage settlement issue, it is easy to see that short sales are less detrimental to the housing market than a homeowner going into foreclosure and the property becoming an REO (Bank owned). It is extremely difficult for the market to fully recover with a high percentage of REO properties still out there. That is why short sale properties have improved the real estate market exponentially over time when they are approved and has helped to stabilize and increase property values.
For homeowners that want to remain in their home, the loan modification option exists to make this a possibility. Read Loan Modification Tips for more information. The disadvantage of loan modifications is that they are highly unsuccessful. Bank of America had the most disturbing loan modification approval rate. In 2009, only 98 out of 156,864 borrowers in the trial loan modification program had received permanent fixes. That’s 1 person out of 1,600 applicants! The worst part is that when a loan modification is approved, they rarely show lasting results for homeowners in need.
The default rate of loan modifications is nearly at 80% within only a year. That is an extremely high percentage in a very short time frame. The result of failed loan modifications is more homes in foreclosure. Pessimists tend to believe that this is what many banks hoped would happen. Banks received credits for allowing loan modifications and then got the houses back in the end after they went into foreclosure. That is why a short sale is a much better option for homeowners that are underwater and looking to help save their credit.
If you are considering doing a short sale, it is important to work with professionals that are experienced in short sale negotiation. The best thing you can do is to find an investor or real estate solution company that can make an all cash offer for a property in pre-foreclosure. The bank sees an all cash offer as much more desirable and less risky than an offer that is contingent on financing. It is also important that the investor or real estate solution company is willing to stay in the transaction for as long as it takes to get the short sale approved. The reason being is that short sales can take anywhere from 2 months to over a year to get closed out. Most retail buyers do not have the patience and loose interest in the property within a couple months. Visit www.midwestshortsalesolutions.com if you are interested in working with a real estate solution company that has an extensive power team which includes an attorney representing the homeowner, a negotiator that is experienced in working with the bank, a realtor that understands your market, and a buyer that will purchase the property.