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What’s the Holdup?

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Posted On: 02/15/2012

QUESTION:

My son bid on a short sale over six months ago for a house with the right price, location and size. The lender has a lien on the property that was supposed to be addressed within the first two months of the bid. It hasn't happened. Is there anyplace we can get a positive answer and not a total runaround?

ANSWER:

The owners want to sell. Since short sale owners owe more than the house is worth they need the lender's agreement to let them out of the mortgage without demanding cash at closing.

Your son – the buyer – has found a great house at a good price. The reason the price is so good is the assumption that the lender will accept a loss.

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Now imagine that you are the lender. Would you rush to say yes? Only if you could assure that you were getting the highest possible price and the smallest loss. As a lender you would want to check the market value and you might also want to see what other assets the seller has that might be used to satisfy the debt.

Demanding an instant answer from the lender may not help your son. The lender can just say no and allow the property to foreclose.

Logically, the lender should choose the option that yields the best financial result. The catch is that what seems like the best financial option is not a sure thing – real estate brokers report situations where lenders turned down short sale offers only to foreclose and later sell the property at a severe discount.

The right alternative for the seller and your son is to show the lender that the offered price is the best available, that a short sale is a better option for the lender when compared with a foreclosure and that delaying the sale could result in the lender owning the property – something it does not want.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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