Short Sales, way out of a mortgage
In a tumultuous real estate market, more strapped homeowners, lenders are striking ’short sale’ deals
In happier times, Hugh Hammill lived in a Mastic fixer-upper bought for $100,000, but soon, he will sign away his house in a way that damages his credit and forces almost all involved to take a loss.
His house, appraised in the low $220,000s, will go to a buyer paying about $183,000, which is almost what Hammill’s two lenders will recoup on a $300,000 refinancing.
The deal staves off foreclosure for Hammill, 47, a printing business owner who stopped making payments a year ago on his refinanced mortgage. He said he used the loan to pay other debts, repair after deadbeat renters and make up for his printing business, which was suffering in the digital age.
“There’s going to be no money out of my pocket,” Hammill said, “and I’m not going to have any money in my pocket.”
It’s called a “short sale” - a house sale in which lenders, creditors and often real estate agents agree to take hits on what they’re owed, with homeowners asked to prove they are destitute and that the property’s market value is less than the mortgage. Some lenders figure they are better off getting some money now rather than risk ending with less under the more expensive and time-consuming foreclosure process.
A seemingly lost tactic for almost 20 years, such deals have made a comeback, amid the turmoil in the housing market.
Just in the past six months, business at the National Short Sale Center has shot up 350 percent, said its president, Travis Olsen, whose Arizona-based company charges $995 to negotiate short sales. The company has been getting 3,000 calls a month, compared to 500 six months ago, he said. “We can’t grow fast enough,” Olsen said.