Facing foreclosures? A short sale may be a better option

Click here to listen or download (short sales.mp3, 14.89 MB)

• Why more distressed homeowners are taking the short route
• ‘Reduction of principal used to be taboo’

Millions of Americans, especially in California and a few other states, are living underwater – in homes whose market value is less than their mortgages.

For those unable to make the payments, foreclosure is often the result, since government “help” programs have often been seen as too little, too late and applicable to too few.

But Southern California real estate investor Eli Tene says there is a better way for many: the short sale.

“Reduction of principal used to be taboo. Finally, they are getting to it,” says Mr. Tene, managing president of IShort Sale Inc., which describes itself as one of the largest short sale firms in the U.S.

“They are still putting some limitations. It only works for people who didn’t missed payments,” says Mr. Tene, who notes that as many as 10-12 million homeowners face a serious risk of foreclosure over the next three years.

But he says lenders are waking up to the fact that getting something in a short sale is better than getting stuck with owning the homes they have foreclosed on.

(Eli Tene talks about when the short sale may be the right sale in today’s CVBT Audio Interview via Skype. Please left-click on the link below to listen now or right-click to download the Mp3 audio file for later listening.)

Mr. Tene has some advice for those faced with mortgage problems.
• Communicate with your lender from the moment you are having difficulties making the mortgage payments. Many times, continuous communication with the lender prolongs the time frame from the beginning of the default to the initiation of the foreclosure proceedings.

• When communicating with lenders and when being asked over the phone to provide financial information, never furnish such data without organizing it on a piece of paper and studying it. People tend to provide wrong or un-audited financial information over the phone, which is being recorded by the lender. Changing these figures later might be difficult.

• Substantiate an income. The most important key factor of obtaining a modification is to substantiate an income. A lender will not grant a workout to anyone who is not able to show hard proof of income. Make sure your records are straight, especially if you are self-employed. Go thoroughly over your income and expenses. Cut all unnecessary expenses and trim existing ones. Lenders like to see the borrowers living on a tight budget before they are being asked to cut their mortgage charges. Make minimum payments to credit cards. ?

• Know the programs available on your loan. Obtaining a loan modification is somehow considered as a "mini loan." As such, you have to know the programs available on your loan, know the exact numbers and ratios the lender is looking for (in most cases the lender will not provide it to you), and understand the lender's language. If you don't feel secure communicating with the lender and obtaining the modification, consult a professional.