The Short Sale Alternative To Foreclosures

October 3rd, 2007

In Tucson with foreclosures on the increase the local realtors are finding an alternative in short sales. Lenders allow themselves to be persuaded by the borrower not to go for foreclosure when the price of the house is less than the mortgage dues but to allow a short sale. Lenders require documental proof from the borrowers about financial hardship. The lender pockets the sale amount and forgives the balance that is still due. In this way both sides benefit. The lender is spared the bad name of a foreclosure tag and the lender gets out of the time and money consuming hassles of foreclosure. If the lender had pursued the usual operation of foreclosure the loss would have been greater than in what is pocketed by a short sale.

Short sales have been on the rise since the last eight months. Special classes are being held for agents. It needs tact and patience to open a dialogue between stressed borrowers and suspicious lenders. The operation requires more time than in the case of an ordinary sale. In fact short sales are the current trend. Lenders are generally a stubborn group and not willing to talk about alternatives but now with so many foreclosures weighing them down with the additional burden of a falling property market, they are willing to see reason in short sales. Banks are far from eager to become landlords. They want money and not own non-performing bricks.

However borrowers have to think twice before going for a short sale. Apparently the idea of being forgiven a certain amount of the debt sounds good but the money that is saved is taken to be taxable income by the financial authorities. – The Internal Revenue Service. One saving clause is that the lender is not allowed to hold a lender accountable for paying more than the collateral. This gives coverage to most single-family houses and duplexes in Arizona. The owners of these units do not have to pay for excess debt. But in the case of refinancing this condition does not apply.

No matter what the options are the first thing is to contact the lender and not keep silent. An exit route is sure to open up. As another alternative one seller decided to hold her own auction to fight the stubborn market. But the results were far from satisfactory.