A growing number of homeowners behind on their mortgage and facing foreclosure are finding a way to sell despite the glut of Valley homes for sale.
They are turning to “short sales,” which are similar to regular home sales except a deal is worked out in which the lender accepts what the house is appraised for or what it will currently sell for instead of what is owed on it.
So a homeowner would sell the house to a buyer willing to pay the current market value of the home, and the lender takes a loss on the rest.
Short sales are the latest trend for metro Phoenix’s slowing real estate market, and housing advocates are advising struggling homeowners to contact their lender about a sale before falling into foreclosure.
As foreclosures rise, lenders are more motivated to do the sales because they at least get most of what they are owed.
Homeowners don’t get any equity from the sale, but they also don’t get a nasty foreclosure mark on their credit record. And although lenders lose out on money they’re owed, a short sale lets them avoid a costly foreclosure on the home.
Lenders can benefit
Most lenders prefer short sales because foreclosures cost them time and anywhere from $30,000 to $50,000 per house in legal, appraisal, marketing and servings fees. A short sale gets a home off their books and typically costs a lender less than a foreclosure.
At a recent foreclosure-prevention town hall meeting in Phoenix, the director of National Initiatives for mortgage giant Freddie Mac encouraged housing advocacy groups and lenders to steer people toward short sales if their only other option is foreclosure.