Short Sales Gain Momentum May 22, 2009

Some good news on the foreclosure front, more lenders are recognizing that agreeing to short sales is in everyone’s best interest.  In an interesting article by Bob Tedeschi of the NY Times, he notes that Bank of America is streamlining its short sale process.  As one of the country’s major lenders (which took over Countrywide the biggest sub prime)  Bank of America is reacting proactively to help its borrowers (and itself) salvage more value from short sales than would be received from a foreclosure. In a normal (non short) sale, the sales proceeds are used to pay all the sellers closing expenses including the seller’s mortgage, any other liens, real estate commission, transfer taxes and any open real estate taxes and water bills.   After paying all the bills the money left over belongs to the seller.  When the sales proceeds are less than the seller’s closing expenses a short sale is needed to allow the house to be sold.  The seller approaches his mortgage lender to accept a short sale whereby the lender takes less than is due and lets the seller sell the house.

While the banks aren’t happy to have to accept billions in losses they are getting used to the economic reality that borrowers in default are not likely to bring their accounts current so short sales make the best of a bad situation.  While the seller avoids the cost of the foreclosure process, the seller get two benefits – his credit score should be less affected by a short sale than a foreclosure and the lender agrees to forego the right to sue the seller for its loss. Many lenders have been hesitant to accept short sales in the hopes that a bailout plan are now actively working with their borrowers and are more open to short sales.

Steven Decker is a New York Personal Injury attorney specializing in New York real estate law , New York business law, and New York franchise law. You can visit his Law Firm Decker, Decker, Dito and Internicola website by clicking here, download his FREE New York Car Insurance book, or call him at 718-979-4300 or 1-800-310-5520 for a free case analysis.

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