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» Real-Estate >> View Article

Better Than a Short Sale or Foreclosure

By Debbie Rood

There are several options to aid in “selling” a property during a down market that the majority of sellers do not know exist. The recent rise in troubles for many homeowners is causing an avalanche in foreclosures and short sales. Most people understand the basic concept of a foreclosure but the short sale has recently gained notoriety and is not understood nearly as well. Neither is in the best interest of the homeowner unlike like some of the options in this article.

First let’s understand some of the negative impacts to a homeowner from the standard method of solving a possible default situation. The short sale is similar to a foreclosure minus the long drawn out legal process. Basically the lender agrees to accept less than is owed against the home and allows the seller to walk away without owing the difference. The catch to this technique is you still need to find a buyer and the deal must be acceptable to the lender.

In a foreclosure the lender and homeowner do not cooperate with each other as a rule. It can be a messy process that drags on forever ultimately resulting in the property being sold at auction to the highest bidder. If the proceeds from the sale are not sufficient to pay off the loan the homeowner may be responsible for the difference. This may result in the homeowner filing bankruptcy. The problem with both of these methods is they can damage the seller’s credit file making it difficult to start over.

There are many alternatives available to sellers that may avoid both of these methods. The key is to be proactive. Take action if you know trouble is on the horizon. Whatever the problem is, it will not go away because of denial. The sooner you become proactive the better the odds of solving the problem.

Now let’s look at some alternatives. The option that gives you the most control is switching sides by adopting a different mindset. Become a buyer instead of a seller. This works best if there is some equity in the property but it can help even if that is not the case. Think and act like a buyer instead of a seller by moving against the normal flow of real estate transactions. Typically buyers move up in price range unless they are empty nesters or nearing retirement. Try buying a smaller less expensive home by offering to trade your larger home. Finding a buyer in a down market is a problem for most sellers, even those that are in the upsizing mode. By offering to trade properties you solve this problem for both parties.

Once again, being proactive will make this method much easier. It will be a lot easier to obtain financing for the smaller home if there are no late payments in your current mortgage history.

My next suggestion is to take off the blinders. Most buyers and sellers have preconceived ideas about what will or will not work. Get rid of this anchor, throw it overboard. If your ship is sinking you can not afford to carry dead weight. There is a hierarchy of what sellers want in exchange for what they have. Cash is king because it is an easy medium to get from one position to another but it is not the only solution. The better you understand this concept the more likely you will succeed in making a trade.

A well maintained home in a nice neighborhood is higher on the list than an infinite number of other assets. This is especially true in a down market. If you think a nice home is hard to sell what amount of excitement would a vacant lot create? In every large city someone has purchased a lot in anticipation of someday building. Every year since they bought the lot the cost of building materials has increased. Get the picture?

Sellers are don’t wanters, they do not want what they have. This is true no matter what they are selling. Look for ideas in the newspaper or any other place sellers advertise items for sale. Make a list of what you want and then prioritize the items, then think like a buyer and offer to trade what you have for what you want.

Check back, in a few days I will publish another article on a similar subject entitled, Selling to an Investor.

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