More Minnesotans saying YES to Short Sales
Short Sales make good “business” sense
This past two weeks in Minnesota we have seen an influx in sellers of all kinds having interest in looking into selling their home on a short sale. Gone are the days where it makes sense to ride out the market correction and wait for your equity to return. More Americans are now realizing this is not a reality and many times it makes financial sense to rid themselves of an asset that has so much negative equity. We have witnessed the increase in acceptance with everyone from entry level homeowners, to executive level sellers who still have very healthy incomes.
Small price to pay for stronger financial footing
The bottom line in doing a short sale is looking at what you stand to gain by taking a relatively short term hit on your credit. The gain can be having the ability to purchase a similar home in a similar neighborhood for 40% less that your current mortgage balance. This is appealing to anyone who is looking to strengthen their personal balance sheet in the tough economic times. The fact of the matter is we will be at the bottom of the challenging market for quite some time and does it make sense to wait 10 years for you to return to even?
Banks have seen the light
Banks are realizing that short sales are good for them, good for the market, and the right thing to do. You still have some larger institutions who have a very apathetic approach to the foreclosure process. They don’t really care if the house goes through full foreclosure, and it sets on their balance sheet for two years. That concept doesn’t sit well with most Americans. In some cases our tax dollars have supplemented those efforts, and have allowed the Banks to have that attitude with very little risk. The problem is this is very anti-recovery. When more foreclosures come to market it prevents prices from rebounding since the homes now are priced less than they would have been if the homeowner did a short sale. For those reasons several banks have improved their process and willingness to work through a short sale with a homeowner. In the government sponsored HAFA program they are further pushing this through incentives to the homeowner and lender.
Short Selling is not frowned upon by most
In the early part of the down turn most business minded homeowners felt a short sale was unethical and not living up to ones financial obligation. Now the thought has shifted and many homeowners are realizing when a market corrects by 35% how does it make any financial sense to suffer that kind of a hit. The conversations we have been having in general turn from “How does a short sale work?” to the homeowner saying, “This really does make more sense then draining our kids college money to sell our home”.
There is a downside
If you have a need to finance a major purchase in the next 12 months a short sale generally doesn’t make since if you can afford the monthly payments. You will take a hit to your credit score although much, much less than a foreclosure. Many of us have been obssessed with having a high credit score over the years and you really have to accept that fact that for the short term that score will loose some of its luster.