Sale of Real Property/Real Estate in a “down market”

Filed Under Real Estate Law · Tagged:  

There are many pitfalls and  discouragements to the sale of real property in the current economic climate, from the reduction in land values, (sometimes below what the seller may owe the bank) to getting to the closing in a lending environment where banks are under increasing external and internal regulation and scrutiny, thereby prolonging the underwriting process and closing cycle.  These “negatives” may be offset by a consideration of the upside to today’s market conditions.

The sale of real estate in Orange County has not become less complicated in the past year.  However, there are signs during the mid to latter part of this year that the sales have increased in volume.  For one thing, interest rates from banks and other lenders have been at historic lows recently.  These lower rates in conjunction with lower prices have made to market more attractive to some well qualified buyers.

Another factor driving sales appears to be many banks willingness to accept less than the amount owed by the seller on an existing mortgage.  The process wherein a bank accepts less as a payoff than that which is owed by the borrower is called a “short sale”.   As many of us know, the foreclosure rate in Orange County has been running high.  Banks are engaging in a process of foreclosure that results in there maintenance if not ultimate ownership of numerous homes throughout the county.  The time and expense of the foreclosure process has resulted in banks considering the “short sale” option.

A short sale requires a homeowner (in most cases, unable to afford to pay the mortgage on the home) to submit financial information to their mortgage holder substantiating the financial hardship.  The property is listed for sale, and an offer of some amount less than what is owed by the borrower is entertained by the seller and submitted by the seller’s attorney to the bank for consideration.  All fees and expenses for the sale are also “backed out” of the sale further reducing the amount paid to the bank at closing.  In many instances the banks are accepting many thousands of dollars less than the balance owed by the borrower in order to “close the books” on the underperforming loan and move on.  The short sale process is by no means simple or swift, but for many homeowners it is a viable alternative to foreclosure and loss of the home through that process and all it entails legally.

To learn more about the opportunities available to buyers and sellers of residential real estate you should contact an attorney.  The Law Office of Ronald J. Salvato can assist parties seeking to buy or sell real estate in these trying times.