What Caused So Many Foreclosures And Short Sales In The Real Estate Market?
There are a few different ways to go about purchasing a home. Generally, homeowners have to take out a home mortgage to buy a home, and that mortgage has to be repaid in monthly or regular payments. If the homeowner ends up not being able to repay the mortgage with those payments, the home can be seized.
In 2007 the real estate market suffered a huge crash. This resulted in many homeowners being unable to keep up with their mortgage payments. This in turn causes foreclosures.
A main reason for so many defaulted payments was because when borrowers were having a hard time making payments they had very slim changes of being able to repay it. The only option was refinancing the home with a lower interest rate, which many mortgage lenders were not willing to do because of so many foreclosed homes.
Since the real estate market was in an up market before the crash, homeowners ran in to trouble keeping up with paying the mortgage bill. They couldn’t just sell the home and purchase a more modest one. That was no longer an option, since there was no profit to be gained in selling a home in a down market.
As home prices decreased, interest rates increased. It increased so much that foreclosures continued to happen at a high pace. Homeowners were kicked out of their home, and then the institution that lent the money in the mortgage would auction the home themselves. The home would still go at the lower price, however. The large amount of foreclosures caused the government to step in.
This is where short sales come in to play. A short sale is when someone sells a home at a price that is much lower than what the homeowner originally bought the home for. The original homeowner’s pending mortgage payment was much higher than what the selling price was going for, but the lenders accepted the initial price to avoid expensive foreclosures and long repayment options.
Short sales are most often considered the better option for a homeowner. While there are still negative outcomes of short sales, the negative aspects are generally considered a much better option than a foreclosure.
For example, after a foreclosure if a homeowner wants to get a new mortgage loan they need to wait nearly five years typically before they can qualify. Short sales, however, usually take around two years. Also, because of the Making Home Affordable (MHA) Program, short sale owners get an allowance of ,500 for relocation expenses, and are usually exempted from any taxes on the forgiven amount of the real estate sale.
Purchase of Short Sale Question?
Asking price of approved short sale was $199k. We offered $190k. Sellers accepted, and we’re waiting for the bank. (Our agent supposedly has a good response and able to call the bank negotiator). We our offer was accepted July 6th (by seller). We put in our offer we must have a response by July 31st, or else we can recind our offer. Do you think they will respond before then, if at all? Thanks!! We’re in San Diego.
Please serious responses only.
) I’d appreciate it.
PS: We’re only dealing with one bank…not 2.
How long does this process usually take?
How does it work with an APPROVED short sale?
My husband and I put an offer on a short sale home that was already approved. From my understanding (correct me please if I am wrong), if it is an APPROVED short sale that means the bank already approved it at the listing price. So from what I’ve been signing in the papers, I’m not working with the actual sellers of the place. Because where I’m signing it has the names of the actually sellers, not the bank. So how long does it usually take with an approved short sale? Its been on the market for over 3 months…no offers have been submitted at all. We’re the first. My agent is pretty optimistic and say that we should hear soon, and close by the end of July…when he says close, does he mean close of escrow?
I’m going to talk to him later, but my husband has been doing all the yapping and I’m more of a visual person so thats why I’m writing her. Thanks!
(We’re in San Diego, CA)
My son just went through a Short Sale in Merced and it took over two months. I am a licensed real estate agent and can tell you it is totally in the lender/banks hand. Most institutions are working short staff and process is taking a little longer with all the foreclosure that are happening maybe with luck and if your agent is persistent.
An APPROVED short sale means the bank will consider short sale offers. It does not mean they will accept YOUR offer, even if it is at full list price.
The sellers will need to sign all the paperwork, but the bank will have to approve the final amount they will receive for the sellers mortgage.
The amount of time varies from bank to bank. It could be anywhere from a day to a month or more. 2-3 weeks seems most common.
My landlord in foreclosure, but short sale is pending, how many days do I have to move?
I know lots of people are entering this situation, and I have read a lot on the subject – but lots of different answers can be confusing. My landlord went through Notice of Default and Auction Sale date has been postponed once now as there is a short sale offer that is pending by a Real Estate agent representing my landlord. I know there are different rules and laws for Federal, California state, San Diego County, and my small city outside of San Diego – where I live in Spring Valley, CA in east San Diego County.
1-Question – If the short sale is made before the next auction date, how many days do I have to move out of the house?
2-Question – If the short sale does not go through, and the house is sold in auction next week, how many days do I have to move out of the house?
3-Question – If both short sale does not go through, and bank does not accept bids at the auction (bank keeps the house to try and sell it for more than was bid), how many days do I have to move out of the house?
I know there are many smart people on this subject out there, especially in California, and I really appreciate your help and good answers.
Thanks,
Tenant of Foreclosed Landlord in San Diego
Forgot to state another pertinent fact – I do not have a lease, it expired years ago and we are on month-to-month. Seems like the pattern was dependent on having a current lease. Does not having a lease change the answers?
If you have a lease you do not have to move at all. Weather it is sold or gets foreclosed, both the new owner and the bank are legally required to honor your lease.
IF YOU HAVE NO LEASE THEN: 1. old owner can give you 30 days notice at any time. New owner can give you 30 days notice as soon as they legally take possession. 2. Same as #1 3. If the bank takes possession they must give you 90 days notice.