Short Sale Tsunami – Catch the Wave

With BILLIONS of dollars set aside to help homeowners who are facing hardship with homes that are “underwater”, the Government’s new plan is designed to prevent a tidal wave of foreclosures.  The question is “will it”?  Will it affect the number of homeowners who will need a short sale?  The plain and simple answer to both is “NO.”

The Bailout has sparked some real cat fights between tax-payers, politicians, economists …at local and national levels.  Everybody wants stabilization, but the debate over the effectiveness of this program is raging.  As it stands, it’s publicly broadcasted “intentions” far out-weigh the expectations the program has created and has set the stage for undeliverable promises.  (This article is from the www.ManageMyShortSale.com April Newsletter.)

Most Americans facing financial hardship, who live in an over-leveraged property, will not qualify for the plan.  That’s right; the majority will NOT even qualify. The plan requires that their homes are not over-leveraged beyond 105% of their current fair market value, PLUS they cannot be in severe default or have had recent default history.  The plan does not cover high-rate second mortgages, HELOCS, or investment property. There have been some homeowners whose payments have even increased after doing the government-sponsored re-finance.

Most, homeowners who need the assistance dollars cannot afford their home for reasons that will not be fixed by the government: job loss, income loss, default habits, family issues…these will still plague Americans despite bailout dollars.  Many of the properties in the foreclosure-blighted communities talked about by the government are owned by the people who do not qualify.  Plus, billions of dollars in government assistance does not change the fact that some people simply cannot afford their homes or would walk away even if they could qualify for help.  Of those that attempt a mortgage work-out, there is plenty of evidence that over 60% will end-up back in trouble in less than six months.  Most homeowners are going to need short sales, NOT government-sponsored  work-outs.

Know too, that the bailout will NOT help tax-payers that are current on their mortgage and have locked-in 30 yr mortgage products at reasonable rates, but whose homes are also now worth less than they owe.  There are no sizable subsidies for equity lost.  Should they end-up in a must-sell situation, they too will need a short-sale.
With rising unemployment rates, the 1.2 TRILLIONS in ARMs (adjustable rate mortgages) that are going to re-set in the next few months, and still declining markets, there is going to be a tidal wave of homeowners in the next couple of years that the government program will not be able to assist.

It is short sales that help to stabilize neighborhood home values.  Homes sold in short sales are generally not sold at the steep discounts associated with bank-owned properties.  They are not seen with the same stigma and are generally sold to owner-occupants.  Furthermore, this is a buyers market and short sale discount opportunities are the perfect match.
The bottom-line is this: We have never been at a place in our careers like this.  The need for professionals to handle short sales will be at its highest level ever. There are distressed homeowners needing assistance at every corner. As professionals, we can offer them a better option.  The housing bailout is like a band-aid put on a gushing wound.  To help our local markets, we short sale specialists are the answer- not bailout billions.
If a homeowner asks if they qualify for the program, you are ethically required to direct them to where they can find that answer.

For more real estate industry articles and videos visit www.RealEstateBusinessMentors.com or visit www.AskBobLachance.com for any real estate questions.