VARbuzz: Banks suddenly getting it: Short sales are better than foreclosures
You can almost see the light bulbs above their collective heads — banks, it seems, are beginning to realize that it’s better for everyone (especially them) to do a short sale than to foreclose on a homeowner.
Now banks have decided the deals [short sales] are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives.
Those are the words of Bill Fricke, senior credit officer for Moody’s Investors Service. His point: If lenders can’t fast-track their foreclosures, short sales are a better option. Imagine that.
Not only is a bank likely to get more money from a short sale (“Losses for lenders are about 15 percent lower on the sales than on foreclosures”), but it doesn’t have to add in the cost of taxes, maintenance, HOA dues, and so on. When foreclosures were rare that was one thing, but these days the market is flooded with the things.
And get this: In some cases, banks are paying people to take the short-sale route.
JPMorgan Chase (the Bloomberg article explains) agreed to let one woman sell her San Marcos, Calif., home for about $200,000 less than what she owes, and gave her $30,000 to cover finding and moving to a new home.
Now, this clearly differs from “principal forgiveness” because… oh, wait.