If you are unfamiliar with a short sale, is when the debt owed on a real property exceeds the current market value for the same property. Also referred to as an underwater mortgage. The real problems entered the room when the initiated ‘underwater’ mortgage note was too high to begin with. As economic trends change, so does personal (home) income and expenses. Bank lenders were literally given away mortgages to anyone, regardless of the debt-to-income ratio*.

Short sales have become a relative loose term over the several years, 7-8 years to be exact. However, Lately there isn’t too much talk about it. It almost seems as though the real estate market has corrected itself from the housing bubble in 2008. Home property values have surpassed those reflected back in 2008. However, this still does not indicate that there are not underwater mortgages.

There are some investors that I’ve personally had the pleasure of networking with say that, “Short Sales are Dead”. Other investors, are still adamant that short sales are very much alive and well. I personally have not seen too much slow down in the short sale arena, at least not in Florida. But it does pose a serious question: If the real estate market has correct itself, that means then that the market value prices have also gone up. What does this do then to a possible short sale? The answer quite frankly remains the same, does your mortgage exceed the current market value? Have you missed mortgage payments? These are are valid questions to determine the likelihood of a bank lender to consider or approve your short sale request.

Those that survived the housing bubble and remained in their homes are now having financial difficulties. Other factors in the economy have affected families even though not strictly related to real estate. Gross Domestic Product (GPD) for example reports a drop in unemployment rates. If that were really true then banks would be extremely reluctant to working on your short sale request. A new ‘bubble’ is emerging where consumers have increased their consumer debt on credit. Working income is not sufficient to cover the household expenses, and the cost of living has not decreased. ‘Analyst’ say that the market has fully recovered, but I am still skeptical. In some households the debt-to-income ratio is too high even to qualify for a loan or refinance. Especially now since the FED has increased the lending rate by a quarter (.25%). This increases the borrowing costs, including credit cards, revolving, auto loans, etc.

Lenders (banks) are still negotiating short sales, but they are becoming more resilient to drop the price so much from the actual market value. But that doesn’t mean that it’s not possible. I, my team, have been able to negotiate with banks to drop the asking price at least anywhere between 40-45% of the property value. And on top of that, get the banks to pay / give the homeowners monetary relocation assistance (this various by lender and case). Oh yes, and also negotiate with each lender(s) not to pursue the homeowner with a Deficiency Judgment. (A Deficiency Judgment is a court order issued by a grantor, in this case a bank lender, to go after the homeowner for the remaining balance on their loan.) The banks know that if the homeowner defaulted on the initial mortgage debt, they will most probably default on the Deficiency Judgment.

We are sure that we can deliver under valued, distressed properties at wholesale prices.

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