Wachovia Corp. is offering its borrowers money for selling their houses short, rather than have them go into foreclosure.
A short sale is when borrowers get their lenders' permission to sell their property for less than they owe in loans. Usually with the help of a skilled Realtor to negotiate on their behalf to have all liens released.
According to an analysis by market research firm Campbell Communications. Short sales are expected to make up a larger part of the market in the next two years as to before last summer only making up to 20% in California.
Homeowners are often confused with the concept of a short sale, and the term short sale has a bad reputation of causing disappointment and frustration. Often taking nine months or longer to get approved by lenders, the term short sale, fails it name. As a result, many homeowners allow themselves to fall into foreclosure. Especially if they haven't hired the right Realtor to sell their home.
Lenders typically say a short sale is quicker and less costly for them than a foreclosure which can cost lenders sometimes $40-$50K or more. Wachovia is being unusually aggressive in converting potential foreclosures into short sales.
The offer will be given depending on the situation. Generally it will be an amount that can help with moving expenses. In exchange, the former owner agrees to leave the house by a specified date and that the property will be left in a good and clean condition. Most banks do this now only when the foreclosure has already taken place to get them out and the banks call this usually "Cash for Keys".
Wachovia is promoting the program quietly by inviting real estate agents to seminars run by employees from the bank's short sale unit. This why it is key to always hire a professional Realtor to help you out in these situations.
Another key feature for borrowers is that Wachovia's program leaves them with no lingering mortgage debt.
The cash incentive is only one of several steps Wachovia is taking to promote and streamline short sales. The lender dramatically curtailed the amount of paperwork short sellers must provide to get a sale approved, allowing them to get a short sale closed in as little as 10 days.
Wachovia is planning to shorten that time further by asking real estate agents to alert it to short sale listings so it can order an appraisal before a bid is made. When a bid comes in, Wachovia will know whether it's in the range of negotiation.
This is very good knews for borrowers facing foreclosure. Doing a short sale in most cases is such a better alternative. I hope this is a lead that most lenders will take to help borrowers get out of tough situations easier.