I often get asked if we see short sales and Foreclosures in Danville? The answer is yes. In fact, they’re everywhere not just Danville! If you are a little confused over what these two are, let me take a brief moment to explain them and help clear up any confusion.

A Short Sale occurs when the proceeds of your home sale falls short of the balance owed on the property.  In a short sale, the lender agrees to let you sell your home for LESS than the loan balance due to an economic or financial hardship that either will or has already lead to default on mortgage payments.

This negotiation is all done through communication with a bank’s Loss mitigation department & your Real Estate Agent. The home owner lists their home and sells the mortgaged property for less than the outstanding balance of the loan, and turns over the deficient proceeds of the sale to the lender. The lender has the right to approve or disapprove any offer.  Extenuating circumstances influence whether or not banks will accept a short sale process. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.

A short sale typically is executed to prevent a home Foreclosure. For the home owner, the advantages include avoidance of having a foreclosure on their credit history and the partial control of the monetary deficiency. Additionally, a short sale is typically less expensive than a foreclosure for the lender.  Most often, in today’s market, Short Sales occur when the homeowner is already in default by missing mortgage payments , or will soon default on payments due to hardship.

It is important to understand that this situation can happen to anyone. It can be caused by loss of employment, medical hardship, financial hardship as well as short term sub-prime loans that are re-setting at higher rates. If the “Short Sale Listing” does NOT sell within the bank specified amount of time (schedule), the bank will foreclose on the property by repossessing the home as security against the defaulted loan, with the intention of selling the property on the market. This property now becomes known as an REO.

REO – means “Real Estate Owned” by the lender. This is another term often heard today, that refers to properties that have gone into foreclosure and are now repossessed by the lender and for sale to the general public, (usually listed by a Real Estate Co. or investment company).

FAQ:

Do Short Sales and REO sales affect the selling price of my home? Yes they do, unfortunately.  The title companies record with the county, the closing price of these homes just like they do those of a private sale. They are in the numbers!  In fact, they are probably the single largest factor in the decline of our home prices over the past three years.

Will I get a great deal buying a short sale? You can!  A few things to consider though.

1.  A short sale can take 90 days or MORE to get full approval from the bank.

2.  If there is a first and second mortgage on the property – both lenders need to agree on the terms before it is approved. So while you may get a good price, the process demands a considerable amount of patience and waiting.

Will I get a great deal buying an REO? You can! In fact, the REO sale is generally a much quicker process than the short sale, because the former owner and a possible second lender have been removed from the equation. The bank will often times approve or counter an offer within a week. The caveat? Some banks will sell the home “as is” and will not pay for any repairs whatsoever. In this case, the buyer needs to make sure they conduct their inspections during the contingency period so they can make an informed decision whether to proceed or withdraw while they have that contingency window in their favor.

Some interesting statistics:

38% of all homes for sale on the market in San Ramon are either short sales or REOs.

55% of all homes PENDING in San Ramon are either Short Sales or REOs.

California Association of Realtors reports that Year to date 2008, the number of homes sold in the 94582 zip code increased +12.4% vs. 2007.

IF YOU THINK YOU MAY BE IN A SITUATION  LIKE THE ONE ABOVE AND NEED HELP UNDERSTANDING YOUR OPTIONS…. GIVE US A CALL. DON’T WAIT!!! ONCE YOU HAVE BEGUN MISSING PAYMENTS THE TIME CLOCK BEGINS TO TICK, AND YOU HAVE ONLY A SCHEDULED AMOUNT OF TIME TO GET YOUR HOME SOLD BEFORE THE LENDER TAKES POSSESSION OF IT.