What Is a Short Sale and Why the Fourth Quarter Matters?
If you’ve been here for any amount of time, you are no stranger to hearing me say that short sales are always a good thing and the fourth quarter is always and ideal time. During COVID, so many banks were helping their homeowners in distress, but once we got back to the “new normal”, banks aggressively began taking houses that were in default.
Does this mean that banks were no longer open to doing short sales? Heck no! If you had put together a short sale package to present to the bank, they will listen up because short sales are even quicker than foreclosures and all the fees that add up during the foreclosure process. so if the market is good, and prices are going up, why would the bank consider a short sale?
The Bank’s Perspective on Short Sales
Because banks know that a homeowner can buy themselves 2 years of free living during the bankruptcy process. Banks don’t want that to happen! They would much prefer a short sale. Banks are not doing extensions like they used to, they are not budging and homeowners are being forced into making those hard decisions. You can save their skin by offering up a short sale.
Why the Fourth Quarter Is Ideal for Short Sales
The best time to bring your short same to the table is during the fourth quarter. Why? Because it is when banks are trying to close out their books for the year and the foreclosures are piling up more and more each day.
The bank has a loan loss reserve. This is an account to cover defaults on home payments. When a home is in default, they have money not only tied up in that home, but also tied up in the reserve and is a loss from no interest being collected. Those add up quickly! This takes a toll on banks, especially when owners file bankruptcy because that can buy the homeowner 2 years mortgage free. That is two years of having money tied up and lost! Banks will ALWAYS consider a short sale because it is a win for them.
The Impact of High Mortgage Interest Rates
Having that money tied up is especially hard on the banks when the mortgage interest rates are high. Why is that the case? Because they want to be able to lend that money in the reserve out to new homebuyers! High interest rates don’t benefit the bank when they can give out loans with those high rates.
This would be like having a party catered and having delicious food for all your guests, but then the road your home is on closes and your guests cannot make it. You still have all that delicious food, and you have people who want to eat it. But is is just going to sit there because no one can get to it. Now that is money lost to you because you spent all that money on the food and now you have to pay to throw it away. What if you had a secondary way to get to your house? Your guests could still get there, it just might take you a second to organize it.
That secondary route is to you what a short sale is to the bank! It isn’t the original plan, but the end result is acceptable.
The Current Surge in Short Sales
Short sales are extremely “on fire” right now. If you don’t know what they are. If you don’t know how to do them. If you need a refresh course. You have got to get yourself to one of my webinars. Now is not the time to watch others make these deals in hopes that you’ll figure it out at some point. The time is right now! When the new year rolls around, your short sales aren’t going to look as enticing. Right now, though? You are the saving grace to the banks and to the people who are not making their mortgage payments. Help the banks gt rid of as many defaulted loans as they can so that they can clean up those books, it really does help the over all banking system countrywide.
How to Approach Loss Mitigation Departments
How do you start? Give a call to the loss mitigation department. They are overflowing with files on their desks and are oiling up faster than they can get rid of them. These folks are busy! The biggest boost you can give yourself is to have your scripting down. They folks in these offices are so bogged down and busy, they don’t have time to coach you through that phone call. Don’t call ask say “do you do short sales?” Likely they will blow you off because banks do do short sales, they just don’t want to muddle through your call. Know your stuff, be ready with what you are going to say, and get to your point.
Navigating the Post-Pandemic Real Estate Market
The pandemic really bought out some uncharted territory for homeowners and the banks. Never before had life come to a standstill because of a pandemic of this magnitude. People were not making payments on their homes because they were given a break from the government. But people were still in their homes, and now with time on their hands. What did many do? Not set themselves up for success, that’s for sure! Many found their way into more debt. They went on shopping sprees, they got credit cards, new vehicles, recreation vehicles. Then bam! Reality came back and they were in deeper than when they started.
It is because of this pause given from the government that we have this looming crash of the real estate market hanging over our heads. Now that we are back to reality, real estate investors can step up and help pick up the market. Homeowners are caught in a place where they are almost giving their homes away to avoid them getting taken back by the bank. Is that something you want to do? Do you want to generate another source of income while also helping out a distressed homeowner? Act now! If you haven’t checked out my short sale webinars yet, set aside some time for yourself to do that. It is worth your investment of time!
Conclusion
In conclusion, navigating short sales effectively requires understanding both the current market dynamics and the banks’ perspectives. Short sales can be a win-win situation for both homeowners and banks, especially during high-pressure times like the fourth quarter or when interest rates are high. By acting now and leveraging the surge in short sales, you can make a significant impact while also creating valuable opportunities for yourself.
If you’re ready to dive deeper into the world of short sales or need personalized advice, visit our website at Dwanderful or book a call for your real estate consultation. We’re here to help you make informed decisions and maximize your real estate investments.
