Most Foreclosed Homeowners Not Attempting Short Sale...Why?

Today we had an office meeting where I learned some interesting facts that I wanted to share. Many banks have released the next round of foreclosed homes onto the San Diego market. This means there is more inventory for buyers to choose from, which is good for buyers. Unfortunately, this same news is not so good for the sellers. If your home is on the market, you now have more competition. Make sure your home is priced very competitively or the buyers are going to pass it by. Buyers do not care how much you owe, how much you want to net or that you think the paneling in the living room increases the value. They are going to compare it to what else is available. Also, if you think you will just wait until the other houses sell and then are able to get what you want; it isn't going to work that way. You see, as other homes in the area sell for less, you have to understand that these are the numbers the appraisers are going to use when appraising your home for the future buyers.


Another interesting fact is that most of the homes that have been foreclosed on and are now on the market were not previously listed for sale. The distressed homeowners did not attempt a short sale prior to being foreclosed on! I find this remarkable and disturbing. Why would the homeowner just give it up to foreclosure? If the home had been sold through a short sale prior to the foreclosure the owner's credit would not have been hit as hard and they would have positioned themselves to purchase another home sooner into the future. Yes, a short sale requires paperwork and some effort on the homeowner’s part but it would be well worth avoiding the foreclosure.
So what is the main reason people do not do the short sale? It is actually because they are counting on a loan modification to rescue them so they can keep their homes. But the reality is that only 10% of all loan modifications that are requested actually go through and this is up from 5%. So what does this mean to the distressed owner? I recommend that you try a loan mod but do NOT beat a dead horse. If you do not get the results you want in a reasonable amount of time move on to the short sale. Do NOT keep waiting for the rescue that is never going to come while the bank files the NOD, Orders the trust sale, forecloses and then kicks you out.