Families use short sales to avoid foreclosure
Posted October 15, 2010 10:52 p.m. EDT
Updated October 15, 2010 11:26 p.m. EDT
Wake Forest, N.C. — Real estate agents in the Triangle said they are seeing lots of business in short sales, which some families are using as a last effort to save themselves from foreclosure.
The Sconzo family used to live in a Wake Forest Estate home, but now rent a small house outside of Winston Salem.
Steve Sconzo said their fall could have been avoided.
It all started in 2006 when they tried to sell the home they purchased a year earlier for $900,000. There were no takers in four years.
“We were struggling in our business and everything we had,” he said.
The Sconzos wanted to get rid of the home in a short sale – a move that sells the home at a reduced rate, but saves the family from foreclosure.
Banks sometimes agree to the deal.
“It is a win-win if they do because they end up netting more from a short sale because they don't have all the expense of the attorney fees," real estate agent Linda Craft said.
Craft found a buyer who paid $710,000 for the Sconzo home. Though it was less than what the family paid for it in 2005, Craft told the bank it was still a good deal in this market.
“I guarantee you, if you foreclose on this property then you will put it back on the market and it will be below the offer that you have right now,"
Sconzo said the bank just never responded. "They just rejected it," he said.
Sconzo was in foreclosure.
Soon, Craft's prediction came true. The bank listed the house for less than the $710,000 offer she brought forward.
According to Craft, banks often base their value for a property on a simple drive-by and on other comparable properties. But in this economy, she said that isn't always the best picture.
"They work within these formulas sometimes that just are so unrealistic based on bad information," Craft said.
As a result, Sconzo said he has a dark cloud of foreclosure over his head for years.
“Trying to get a job or purchase another home, it is going to be virtually impossible,” he said.
Craft said another issue is the massive number of short sale applications. She said they can pile up at banks while deals fall through.
Craft said short sales are still a good option for homeowners in trouble.