I always find it amusing when someone thinks they are entitled to a short sale simply because their home is underwater. We have said it over and over again; but this little Q&A blurb from MarketWatch (paraphrased below) explains it very well:
WASHINGTON (MarketWatch) — Question: In your June 4 column, you mentioned that a lot of lenders are denying short sales due to the homeowner showing that he can make his loan payments. I don’t understand why lenders just don’t approve a short sale if there is a buyer. Additionally, why would lenders think owners can make their loan payments if they are behind, in some cases, 10 months or more? If the lender modifies a loan, then wouldn’t all the missed payments and interest result in a higher balance with payments that are greater than what the borrower was paying previously? It just does not make sense to me. So, the lenders would prefer to go through foreclosure than to approve a short sale with a buyer already waiting to purchase it?
Answer: The short answer, no pun intended, is that lenders don’t want to cut someone some slack if they can afford to make their current payments. Only hardship cases need apply.
At the end of the day, though — and this is what I tried to point out in my previous discussion — the lender’s decision is based on cold, hard mathematics. If it can make more by foreclosing on the borrower and putting the house back on the market than it can by allowing a short sale and getting back only a portion of what it originally lent, the choice is an easy one, at least for the lender.
That’s exactly right. And savvy investors and agents involved in short sales will always keep this in the back of their minds when dealing with short sale properties in any capacity. The best real estate professionals are those that keep motivations in mind when handling tricky short sale transactions.
Thoughts? Post ‘em in the comments!
