91% of our short sale approval letters for January 2013 came with a full deficiency waiver for our sellers! Of the 35 short sale approvals that we negotiated for struggling homeowners last month, 32 of them had the lenders waiving the deficiency. This means that the homeowners are able to walk away from their underwater mortgages clean: with to no requirement ever to pay their lenders the shortfall on the mortgage payment following the short sale, and able to make their move to financial freedom without bearing the burden of past bad debts
The deficiency balance is the difference between the balance owing to the lender on the mortgage, and the net proceeds available to pay off the lender following sale of an underwater home. For example, if Hal owes $250,000 on his mortgage, but his home is worth only $200,000 at today’s prices, he is underwater by $50,000. Commissions and closing costs, after selling the home, might total around $25,000.
So, if Hal is able to obtain his lender’s approval for a short sale, after selling his home and paying closing costs, there might only be $175,000 to pay his lender: $75,000 short of the full $250,000 owed. That $75,000 shortfall is the deficiency.
That $75,000 is just a fictitious example to illustrate how a deficiency is calculated. But here are some real numbers for January: In January, 2013, the deficiencies on the 35 approvals we negotiated ranged from $3,000 to $234,000. The average deficiency was $87,000
Back in 2010, when we started collecting stats on our short sale approvals, less than half of the lenders would waive the deficiency balance. Continuing with our example: if Hal’s lender does not waive that deficiency, it means that he is trying to pick up the pieces in his life, all the while knowing that debt collectors might come after him for $75,000. That situation does not give Hal a lot of motivation to start working at rebuilding his finances.
Fortunately, lenders have come around to realize that short sales are a far better way to cut their losses on a bad mortgage, than spending a year or more foreclosing on a homeowner who simply does not have the money to pay. Now they are actually encouraging homeowners to do short sales - both by waiving the deficiency balance in most cases, and even sometimes paying homeowners extra cash on top for completing the short sale.
These days, in the majority of cases, the lender will waive the deficiency balance. What that means in our example Hal's case is that the lender writes that $75,000 off. They promise Hal that they will never come around to collect it (and that promise is in writing, in the short sale approval letter). Hal can put his bad mortgage debt completely behind him, and look ahead to rebuilding his life.
Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.
In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.
If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/
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