It is undeniable that the mortgage world is a world of chaos lately.  All of the statistics out there are staggering, and sobering, and it is forcing more and more lenders and homeowners to look at other options.  With the number of default letters at its highest level in ten years just in the state of California, lenders have to start looking outside of the traditional methods of doing business and homeowners need to look outside the box or they’ll lose their homes.

Lenders are dealing with more delinquencies than they know what to do with and they are willing to do almost anything to avoid foreclosure.  Many lenders are being forced to accept short sales, something that is not generally done in the lending business.  When we say short sales we are referring to a situation where the balance of the loan will actually go beyond the actual value of the house.  This is done only to avoid foreclosures and until 2005 was rarely considered. 

Forecasting the Mortgage Market

Many were able to forecast that when the sub prime mortgage rates bumped up that it would cause distress and they started planning ahead, forming a specialized market of people who were able provide homeowners short sales to help to avoid foreclosure.  For many lenders, short sales are the only thing keeping them in business and many homeowners would be out in the cold without them, as well.  Many realtors have started taking on short sales to fulfill the market need and experts report that we’ll see many more years of this as there will be another reset of sub prime loans.

Today short sales are more common than ever before, but they do require more time and effort than your traditional sale.  Everyone should be ready and willing to do more paperwork, and they should also be ready for a clear cut timeline as a homeowner generally has just few months from the notice of delinquency to take advantage of a short sale opportunity.  Lenders will not offer short sales to just anyone, for instance they may extend the sale to those that have suffered the loss of a job, illness, death, divorce or change in family status, but they wouldn’t offer a short sale to someone who simply decided they didn’t want to work or someone who decided that playing poker was more important than paying the mortgage.