Did You Know Short Sales Just Pad Your Realtor's Pockets?
"Once again, an endeavor to perform a good deed has resulted in punishment. Having to educate those who should already be aware can be exasperating at times, but I've learned to let it go. What else can be done besides provide a rational explanation and trust that the information will take root? Who can say?I am, in fact, a real estate agent who specializes in short sales. Since 2007, I have assisted well over a hundred families in avoiding foreclosure and obtaining the release of any mortgage deficiency. This is what I do.A primary advantage of a short sale is that it can provide a struggling family with sufficient financial relief to prevent them from filing for bankruptcy. However, this is not always the case. Occasionally, a person's financial encumbrance is so severe that bankruptcy is unavoidable.Therefore, the query is, ""Is it advantageous for a bankrupt individual to short sell their underwater home?""Today, I had the exact same conversation with another bankruptcy counsel. I was informed that the only benefit of a homeowner who has filed for bankruptcy short selling their home is to ""line the Realtor's pockets."" (i.e. me).I respectfully disagree. After taking a breath, I explained why:Reason No. 1: Publication of Private InformationCertain events in a person's existence are documented, some of which are made public. When performing a background check, information such as a person's date of birth, aliases or maiden names, information about property ownership, and financial information such as bankruptcies filed, judgments recorded, and real estate foreclosures are made public. This information is used for a variety of purposes, including a property management company assessing the risk of approving an applicant, an employer verifying that an applicant has provided accurate information, and even parents conducting background checks on potential nannies and babysitters who would have contact with their family.It is not the end of the world to have a foreclosure reported as a matter of public record, but at least one client who worked for a tech company was advised by HR that letting his home go into foreclosure could cost him his security clearance and possibly his job.Reason No. 2: Financial RecompenseNumerous lenders offer homeowners in financial distress an incentive to short sell their residence. A mortgage servicing company, such as Wells Fargo or Bank of America, will pay up to $3,000 in'relocation allowance' to a homeowner who effectively completes a short sale. They do this because it is less expensive for the lender to have someone keep the home occupied and well maintained than to pay attorney's fees to foreclose on the property and risk the home being trashed as the homeowners are evicted, not to mention the carrying costs of maintaining a vacant home while it is on the market. For banks, paying $3,000 to someone to ""take care of the place"" is a bargain.Thirdly, the FutureThe mentality of the majority of bankruptcy attorneys who oppose short sales is to shield their client from immediate and imminent harm. They seek to halt wage garnishments, foreclosure proceedings, and asset seizures. All of these are admirable and essential, and most bankruptcy attorneys manage them with ease. However, they do not adequately consider the destiny of their clients. The one in which financial difficulties have been surmounted and homeownership is once again a possibility.Currently, the waiting period to purchase a property after filing Chapter 7 bankruptcy is four years after the date of discharge. Whether or not a family files for bankruptcy, allowing a home to go through foreclosure will prevent them from purchasing for seven years from the date the lender reclaimed the property. Not having to wait an unnecessary three years is sufficient evidence to convince me that short selling a property and avoiding foreclosure is well worth the effort. Who desires to pay rent for three additional years when it's not required?The decision to short sell a residence ultimately rests with the homeowner, not the attorney or myself. Yes, there is labor involved in selling an overleveraged home. Financial records must be collected. There must be hardship letters addressed. The home must be made accessible to prospective purchasers. There must be negotiations with lenders. All of this requires time and effort, but the net benefit of removing another negative from public records, saving $3,000, and being able to purchase a home in four years as opposed to seven far eclipses the effort required.If only I could locate all that cash in my wallets...
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"Did You Know Short Sales Just Pad Your Realtor's Pockets?"
was written by Mary
under the Finance / Wealth
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comments. The article was created on 31 May 2023
and updated on 31 May 2023