Lenders are in the business of finance, not real estate. They're not designed to own a portfolio of properties. There are many good reasons why a bank will accept a short sale over foreclosure. Here are just a few:
Legal fees. Foreclosure requires attorney fees that can be avoided through a short sale.
The declining market. In a declining market, a property loses value for every month it does not sell. A short sale allows a property to be sold more quickly and at a higher market value.
Holding costs. Holding costs for lender-owned properties add up quickly. These costs include taxes, insurance, utilities, maintenance, management, and other costs.
Repairs. In some cases lenders end up owning properties that are in need of significant maintenance and repair. Some owners who are losing their home to foreclosure neglect or intentionally damage their home.
There are many good reasons for lenders to choose a short sale over foreclosure. Despite these reasons, many short sales are not successful and end with the lender owning the property. We'll cover some reasons why in a future post.
Dan Miller, Realtor, Certified Distressed Property Expert, Keller Williams Realty and DaneCountyMarket.com
Sunday, September 20, 2009
Why lenders will accept a short sale
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One factor that may affect anyone's foreclosed property is their credit score. It has great impact especially if one is trying to apply for a loan or credit card. If possible, it's better to pay mortgage loan on time to avoid foreclosure.
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