Does the Short Sale Have a Future?

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Fannie MaeOne of my Realtor® friends showed me a letter that her client had received about a deed-in-lieu of foreclosure program (à la Fannie Mae) whereby the seller would receive up to $7500. My friend was a little displeased that her client had received this letter because she was about to close the short sale transaction. Now, however, the client is going to opt for the deed-in-lieu because he might get more money.

In 2012, with all of our apps and functionality tools, society pressures us to focus on being the most productive that we can be. So, it’s tough to understand how much time will actually have been wasted if this short sale sellers opt for the deed-in-lieu of foreclosure.

First off, it goes without saying that the short sale listing agent has spent countless hours processing the short sale on behalf of the seller. Not to mention the cost of sign installation, advertising, and time lost not being able to serve and prospect for additional clients.

Next, what about the servicer (including Fannie Mae)? How much time and money was spent by the servicer’s loss mitigation department and by employees at Fannie Mae? Why bother with all the expense if the seller is going to receive a deed-in-lieu offer at the very same time that the bank is processing the short sale?

What about the escrow and title companies? There is cost involved in due diligence activities including generating a preliminary title report, conducting a deed and lien search, and doing all of the activities surrounding opening an escrow (in escrow states). It is unfortunate that title costs are accrued on a transaction that will never come to fruition.

While this deed-in-lieu offer scenario may have just been a simple right hand not communicating with the left, it seems a little tough to stomach the thought that so much time was wasted and so much productivity lost–especially if the bank is going to offer the seller a little incentive for NOT participating in a short sale.

Is this the future of short sales? Or, rather, will the future be consumed by deed-in-lieu of foreclosure?

Photo: flickr creative commons by Jack Everett

About Author

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®. Before landing real estate, she had careers in education and publishing. Many folks say that Melissa is genetically pre-disposed to success with short sales. In fact, last year she and her staff obtained over 500 short sale approval letters! When she isn’t speaking with lien holders, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

3 Comments

  1. Nope, short sales are not leaving because they have always been a part of asset disposition. They were around before this whole foreclosure mess and they will be there in the future. Most of the time a deed in lieu is an approvable process just like the short sale and they take just as long. Also, generally speaking the short sale is a better option than the deed in lieu because of credit implications.

  2. wayne dellinger on

    From a homeowners standpoint if they can get a figure from the lender equal to the monthly rent they would have to pay if they didn’t have the home and get the lender to forgive any deficiency, I would think this would be a good deal. The homeowner isn’t going to get any money from a short sale and they may have to sign a note or have a judgement againts them, so this is a blessing.

    From the lenders standpoint if they can get the homeowner out of the home quicker than foreclosing and being assured that the homeowner doesn’t trash the home, this could be money well spent.

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