Ban All Non-Approved Short Sales
At Wexzilla.com, James Wexler is calling for a ban on all non-approved short sales. Having experienced the nightmare of a short sale, I have to agree with him that banks often cause their own problems and make incredibly bad business decisions. Sometimes they cut off their nose to spite their face.
First, what is a short sale? According to Real Estate Webmasters,
A real estate sales transaction executed with the understanding that the seller will payoff their lender less than what is owed on the property.
This “deal” for the seller is often accompanied by multiple problems. For example, the lender may choose to issue an IRS 1099-A form that shows the deficiency as income which the borrower may have to pay income taxes on. So if the seller owes $100,000 on a property that sells for $90,000, the IRS will count that forgiven $10,000 as income and depending on your tax bracket, you may be out another $2000 next April 15th.
An agent in my office was working with a buyer who wrote a good offer on a short sale. Four months later, the bank still hadn’t given them an answer on whether or not they’d accept the offer, so the buyer walked away. This is similar to what James at Wexzilla was saying,
- The buyer offered $260K.
- The offer was not accepted.
- The bank accepted a lesser price offer.
The bank said no because the buyer offering MORE money was buying through an FHA program. You’d think with the Feds guaranteeing the loan, they’d jump at accepting them.
In my humble opinion, the banks holding these foreclosures are doing just as much harm on property values as the person who didn’t pay their mortgage and lost the home. I know there are mountains of paperwork and endless committees that mull the decisions, but I’d advise the slow banks to pull their head out of the sand and move these properties before they become a blight on the neighborhood.
