Saturday, February 24 , 2018, 8:37 am | Fair 41º


Elaine Abercrombie: The Ideal Short-Sale Client

For distressed homeowners, it may be the best way out of a bad situation

On a nice day in Santa Barbara, it’s hard to imagine everything is not perfect in the world. We know those who are struggling with payments even in our neighborhoods. The good news is that only 20 percent of our real estate market on the South Coast is distressed property, compared with the market in Santa Maria, where seven of 10 properties are either bank-owned property or a short sale.

Elaine Abercrombie
Elaine Abercrombie (Roe Anne White photo)

If you are the one underwater, it doesn’t matter how many others are having the same issue, the world looks colorless. The key to climbing out of this situation is to remember you are not alone. If you have a friend or family member who doesn’t know what their options are, this information will be invaluable.

I spoke with someone just the other day who had been working on a loan modification for almost a year. They had not missed a payment (thanks to credit cards) even though their income had dropped considerably. After hours of conversation with bank employees, they were no closer to closing on a loan modification than when they started. Although it’s a frustrating process, it may be the first step for most people who have missed a payment on their mortgage and still live in the house.

After a loan modification process has been exhausted, most owners have had a notice of default filed on the property. This means that the lender, unless contacted prior, will proceed with the sale of the property for nonpayment within 90 days. In some situations, owners can bring the loan current and stop the process; however, lenders want back payments and penalties paid in full before they will entertain halting the process.

If bringing the loan current is not an option, then an ideal short-sale situation would be:

» Owner is behind on payments or a notice of default has been filled, and if there is a sale date that’s at least two months away.

» Owner has a true hardship such as loss of a job, divorce, health issues, etc., not a situation where they have chosen not to make their payment because they have no equity.

» The owner is in the house and wants to work with the bank so the bank doesn’t lose more money than the market dictates, usually the lender will be happy to work with the owner on a short sale, which doesn’t damage the owner’s credit as badly as a foreclosure.

Most owners willing to work with the bank on a short sale actually are able to stay in their homes with peace of mind knowing when the move date will be. With a foreclosure, you may have an hour’s notice. Wouldn’t it be better for your neighbors to have a “For Sale” sign rather than a “bank owned” property in the neighborhood? And did you know that a foreclosure can affect your credit for up to seven years, where a short sale may be only 24 months?

When applying for a short sale, remember to work with a reputable company that doesn’t charge any upfront fees. After taking the National Association of Realtors’ new designation class, Short Sale Foreclosure Resource, I have learned that the short sale business is a moving target and evolving daily. Banks change their systems constantly. I heard that one lender is getting 700 files a day dumped into its system and staffing is an issue with this increasing workload.

The good news is that it may be possible for those doing a short sale to stay in their home longer than if they chose another alternative.

This market affects the whole community, not just those who are feeling the pain at home. No one is alone in this situation, and we are not immune to our neighbors, friends and family’s pain. When you need more specific information, I recommend you speak with a knowledgeable Realtor about all your options.

Elaine Abercrombie, a broker with Abercrombie Fine Homes at Village Properties, is president of the Santa Barbara Association of Realtors. She can be contacted at .(JavaScript must be enabled to view this email address).

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