How Can A Lender Benefit From A Property short sale?
The event where a property is declared for real estate foreclosure is not only unfortunate for the owners of the property, but also for the lender organization, which has issued the loan securing it on the property under consideration. Certainly, the homeowner has to undergo a lot of humiliation and embarrassment for losing home, topped with a bad credit score along with inducing for one some restless nights and limitless worries to make things even worse than ever. But it is not only the homeowner who suffers for facing foreclosure, but also the lender entity which has to go through a lot of trouble in recovering its losses.
The lender has now to carry out the entire foreclosure procedure, bear all the expenses relating to conducting a successful auction, refurbishing the property to make it suitable for sale, finding the right buyers or investors and, of course, bearing all the direct losses. And often it is so that the lender does not find a buyer at all, meaning loss and more of that! So what can you, as a lender do to overcome this? The answer can be simple though many people are not sure if a short sale is right for them or are to intimidated by the lender to try in fear of making matters worse.
Short sale refers to that phenomenon in the real estate industry where the lender agrees to selling the property in question at a lesser rate than the usual industry rate (that is, less than the loan balance), thereby making up for its losses from the borrower not being able to pay back one's debt. With a successful short sale, the homeowner effectively sells the home at a lower price before the property forecloses and pays off the debt back to the lender entity, thereby avoiding foreclosure auction. By conducting a property short sale, it is not just the homeowner being benefited but also the lender saving further losses.
The lender is directly paid its debt back and it can easily overcome the minor losses that this payment default has induced. The losses are nothing compared to the expenses that the bank would have had to bear n order to conduct the foreclosure proceedings. Lenders are increasingly viewing short sale as an effective alternative to foreclosure as it has its own benefits, which are farther reaching than an actual foreclosure auction. The most overt advantage that short sale has over foreclosure is recovering excessive financial losses. A short sale is usually conducted by specialized professionals and the lender does not need to involve itself directly, thereby saving on its labor.
Unlike foreclosure proceeding, short sale does not involve any additional fees for closing a successful deal. By approving the short sale of the property under question, the lender can expect to get the property price closer to market prices versus foreclosure which can end up being remarkably low.