For Sale

Because of the Sub-Prime lending mess, there has been a lot of press lately on Short-Sales and Foreclosures.  I’m getting questions about this kind deal more often.  We are really not seeing a great deal of these in our mid-Peninsula real estate world.  Yet. Where I am seeing more of them is in San Bruno, South San Francisco, Daly City, and Redwood City.  I’ve talked before about living on Fantasy Island and this, folks, is where we live Millbrae south to San Carlos, where we see few of this kind of “deal”. For entire County of San Mateo, there are only 15 houses in foreclosure as of this writing so I will keep my commentary on Short-Sales.

What is a Short-Sale?  It is a sale of property where the owner owes more to the bank than the property is worth on the open market.  We are seeing the majority of these sales today in areas where there was predator lending practices taking place.  And, unfortunately, these predator lending practices often took place against immigrants.  People with fair income, some debt, but poor English skills who were placed into negative amortization loads that they did not understand.  They were placed in loans with sucker rates — you know the kind — 3% for the first 90 days, and then the rate escalates upward.  Some of those loans escalated up to 7 or 8%.  Some of the people caught in this net find themselves owing more each month on the loan to their house, than they take home.  So, they go to their bank for help and try to sell the house before it goes into foreclosure.  Most lenders are willing to work with the people caught in this net and have their Realtor’s go through many hoops preparing a home for market, pricing the home with the help of the bank, and then hopefully, selling the home.  The bank is in the middle of the process from the beginning because they want to get as much money back on their bad loan, as possible.  But, sometimes things don’t go smoothly for someone trying to buy a house with a short-sale.  Sometimes, even when everyone has done what they were told to do, the bank decides to foreclose and that’s the end of your hopes in buying a home under market.

Your next question should be:  Is buying a property through a Short-Sale a good deal?  Maybe yes, and maybe no.  It is a roller coaster ride for sure because you can do everything you’re told to do and find out that you won’t get the property and you have no recourse against the seller because the seller is the bank that makes the rules that we have to play by. Therefore, they can change the rules any time they like.  And they can and they do. But, if you’re lucky, you can (drum roll, please) get a deal.

So, if you decide to try to buy a home that’s “under water” be aware that you will be asked to do things differently.  You will need to have your loan or loans taken out through the selling bank.  If you’re a risk taker, it could mean the way to buy a home in our Fantasy Island, for less money than your friends spent for a similar property.  But, you must, must, must be a risk taker.  For your agent, they just hope that they get paid in the process because the bank holds all the cards — from pricing the home, to commissions.