How a Short Sale Can Benefit a Lender
Written by Administrator on December 17th, 2010How a Short Sale Can Benefit a Lender
How Can a Short Sale Benefit a Lender?
While a short sale can be an effective relief for a homeowner facing foreclosure, it can also benefit lenders. Believe it or not, property foreclosure is not only a hardship for the homeowner, but for the lending bank as well. The homeowner has to deal with the reality of losing their home and the financial worries that ensues and the banks must find a way to recover as much of its losses as possible. Banks do not want to own homes. They are not in the real estate business, and foreclosing on a home only adds more to their workload.
The lender has to carry out the entire foreclosure procedure and legal proceedings, bear all the expenses related to a successful auction, refurbish the property and make it suitable for sale, and find the right buyer that will offer the closest amount to the value of the home. Sometimes lenders aren’t able to find a buyer for the home, and so they lose even more money with the property sitting as dead weight. The answer to this problem is a property short sale.
Short sale is a process where the lender agrees to sell the property at a lesser rate than the loan balance, thereby making up for some of its losses from the borrower not being able to pay back their debts. With a successful short sale, the homeowner effectively sells their home at a lower price before the actual property foreclosure and pays off the debt back to the lender, thereby avoid foreclosure. This saves the owner from the hard credit score hit that a foreclosure brings, and saves the bank from all the overhead of a foreclosure and auction.
The lender is paid directly from the sale of the home, which saves them from the even larger loss foreclosure would have brought. Lenders are increasingly viewing short sales as effective alternatives to foreclosure as it is far more beneficial for both the lender and borrower. The biggest advantage is avoiding the expense and cost of foreclosure, while recouping most of its money in a much shorter time span than a foreclosure auction.
Unlike foreclosure proceedings, a short sale does not involve any additional fees for closing. Both the lender and borrower are not required to pay for refurbishment fees, nor the legal fees that come with a foreclosure. If a buyer can be found, there is no need to put the house on the market or go through a foreclosure auction, saving both time and money. Most of the time, lenders will receive a much closer to market price offer than they would if they had gone through the auction process.
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Tags: Benefit, clients, directly, Lender, loan modifications, proceedings, Sale, sense, Short, short sale
