Short Sales vs. Strategic Defaults
July 11th, 2010 categories: Foreclosures, General RE Info, Short Sales, Tips for Sellers
The Financial Conundrum
I have been very concerned for the last couple of years with the long term effect of Short Sales and Strategic Defaults. Sometimes selling a property as a short sale is the only option but what about strategic defaults?
Each person’s circumstances are different and you should do what makes you feel more comfortable. I am an advocate to try a loan modification first even though in many cases they are just a way to push forward a financial problem. It may not be the wisest “financial decision” but I think it buys time to work out the problem when the waters have calmed down. Unless there is a reduction of principal the only way to work out the loans is to create a balloon payment; which means at the end of the loan period or upon selling the property a lump sum has to be paid. If someone stays in the property long enough there should be enough equity to pay for it. If it has to be sold anytime in the first years of the loan most likely it will become a short sale but the borrower’s financial situation and the lenders circumstances will be different and you can deal with it then. I am not a financial advisor and I don’t pretend to be one…I know it is a controversial opinion but I think in the long run it will benefit everyone.
I understand trends are important and many people feel that if everyone is doing it, it may be right. I wish I had a crystal ball and be able to see the future as of what will happen in 5-10 years to all the short sales and foreclosures deficiency judgments. For now just make sure you research and understand what you are getting into. Do your homework, talk to at least 3 attorneys and hear different points of view.
I am sharing an article from Current Matters that refers to this topic…
I recently had an email conversation with a well respected real estate professional about the difference between strategic defaults and short sales. We both agreed that we needed to share our conversation with the readers of this blog. Original Question: I have
via A Conversation on Short Sales vs. Strategic Defaults.
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