As a person who often represents the buyer in a short sale, I've often had occasion to talk with the sellers to find out where they're going to go after the home is sold. Since all of them know I'm genuinely curious, most tell me that they were able to secure a rental after the home is sold. Of my four most recent short sales, all four were able to find rental homes--two are still in the area, not far from their original homes, 1 has moved up toward Oakland, and one moved to Tracy.
Since I, too, have been a landlord of a rental property in San Jose and understand exactly your concerns about credit, I did ask each how they were able to secure a rental situation since their credit was obviously damaged by the short sale. Not surprisingly, at least two of the sellers were able to get a rental thanks to the help of their listing agent. The other two were, on their own, able to speak frankly and openly with the landlord who agreed to rent to the sellers. Almost all of them told me that having a current job and documentable income was the reason that they were able to find rental units.
But more than that, Bay Area, I think a lot of the "stigma" associated with individuals who have sold their homes short has fallen to the wayside. Almost everyone understands that there are homeowners who have been displaced from their homes due to the decline in the market, and there is not the associated "blame" that one might assess to a short seller in trouble as one might with a person whose credit was damaged by a series of lost jobs, poor management of credit or bankruptcy. In fact, there seems to be a general feeling of sympathy toward anyone who was unable to retain their home, so that landlords are not nearly as reluctant to rent to a distressed homeowner as they would to in another time or circumstance.
As to your final comment about "short selling" beling so common that its "no big deal," I would argue that to those who have to give up the dream of home ownership, none would tell you that they feel the decision they've made was done lightly, without grief or sorrow, or without trepidation. I've seen the people who lose their homes in short sale and foreclosure and, frankly, these are really nice people who got caught up in an inflated market and are giving up their dreams to get out from under burdens they can no longer pay to maintain. It's heart breaking, and it can be one of the most difficult things for any Realtor to have to witness. It's easy to think that short sales are just someone's way of getting our a mistake, but until you get up "close" to a transaction of this type, you can't know the pain some of these people are enduring nor would you endorse that a person is simply walking away from their obligations.
So that's my take on the short sale. I'm not trying to be maudlin or defend the process, but simply to say there is a human face to each of these transactions, and while you may not be comfortable renting to a short seller, there are many landlords who do understand this situation and will give the seller a chance and a place to live while their credit and the economy improves. Okay?
Area Pro Realty-People's Choice
In short it is giving up on the one thing that was once the foundation of a once successful nation" THE AMERICAN HOME" LOST to BAD Credit and DEBT. Short sales are where ONE THIRD of the nation CONFESSES to practice irresponsibility in handling their own finances and pay the consequences of DESTROYING their OWN credit.
For their honesty in admitting to these claims they are FORGIVEN and the majority of them will be able to have their credit renewed some as early inTWO YEARS . Short sellers as you ask moved on to be renters with lesson learned and avoided FORECLOSURE which would have impacted their credit up to and past SEVEN YEARS.
Debt is no security , living beyond anyones needs is called EXCESSIVE . The perfect security of any home is little or no debt. With prices leveled and downward adjustment on the forecast to continue. The real question of home values have really been sidestepped. Do not believe in the illusion that values have disappeared and their is no reason to buy a home. Ask anyone that kept it and why ? They have a purpose. Their home is worth more to them than what it appraised and for them their home is PRICELESS.. The average person pays over a period of five years $60,000 to rent. The average person in America has paid less than 5% down to purchase a home and are mortgaged and In debt to 95% up to their nose. Do you call that ownership? If you want to make short sales to go away make the illusion of buying a home with nothing down go away. After all those who are renting have little expectation but a place to live and look for no sympathy or relief. But so called buyers that bought with less than six month 's rent money a house deserve more ? YES .the expectation and return of their" Self Respect" for being SO DUMB and so GULLIBLE.
So the blame game continues. since government encouraged it and continues to having learned little from their STUPIDITY and in the meanwhile bankrupted the nation. All those who remained responsible and kept up with their mortgages are innocent and now paying for it.They are now defined as the rich and they are punished as they are taxed higher even when their home is worth less. Forcing them to think that SHORT SALES is a better alternative. For the nation sake pray that they do have more sense. SHORT SALE is
a National Shame that will be remembered by a generation that would like to forget.
It is not something done lightly.
As a Ceritfied Distressed Property Expert it is one of my MOST difficult aspects of my occupation to deal with.
At your service,
CDPE- Certified Distressed Property Expert
These sellers repeatedly state they have always been responsible in the affairs of their lives and never imagined they would have to short sell their home.
To this day, so very many people fail to understand the evil these banks have, like a plague, placed on EVERY citizen of this country. Some still choose to blame the victim.
Fortunately, many have observed the situation, and many more will create solutions allowing these victims to move on with their lives.
We do a lot of counseling for these sellers. Most hate it and are good people who never wanted to be in these circumstances. I regularly assure people they are not alone in this economy and they will recover. I offer tips for financial recovery and credit re-establishment and I listen to their tough situations.
You would be free to choose your standards for credit worthiness, but I suggest you consider a few more facts before you dismiss a potentially good tenant. Certainly there are those who should have known better, bit off more than they could chew and blew it. Most are people who took well intended advice from others and bought in a frenzied market where homes were appreciating at regular intervals. Our economy had been doing great for a long time and even 911 set backs were temporary.
I've known and worked with lots of these people and their stories would break your heart in many cases. You or a spouse get seriously ill and the income is gone. You later recover but the mortgage is far behind and you can't catch up and the lenders won't work with you. By taking a short sale rather than foreclosure you have done the better choice for the bank in most cases.
A company closes after many years; a family bought in the peak of the market and now is unemployed. The tough economy makes it hard to find another job which pays enough to pay the mortgage. You relocate to another state where you can get a good paying job, but not enough to cover your new rent and previous mortgage. You do a short sale, avoid foreclosure and start again.
There are lots of circumstances beyond the control of the home owner who ends up in short sale. If you are a landlord, you are free to set your criteria for acceptable credit, but if you end up with no acceptable tenants for a prolonged period, you may end up needing to do a short sale too.
How about some are on the street.
Some have moved in with friends or relatives.
Some with Mom and Dad.
Some are squatting in Vacant houses.
Some moved to another state where no one will check on them.
Some go on welfare and get a voucher.
Some will beg a landlord to take them in.
It is a big deal; to them.
Most of them rent. You can still get a rental if you have income. Shorts sales aren't as detrimental to your credit as the delinquencies are so if the sellers never went delinquent and did a short sale, they have an even better chance of getting a rental.
I think it's more interesting question that in the past most sales would produce a move up buyer. Today so many sales are short sales or REO's and they DO NOT produce a move up buyer as that sellers credit is damaged for at least 2 years that they won't be able to re-buy. So 50% or so of the sales are NOT producing a new buyer, that doesn't bode well for price increases for a few years.
Bay area, (a peek at short sales in 2012)
Unfortunately, this trend will continue. It is easy to believe the homeowner, who is the victim here, is trying to take advantage of 'the system.' It is a big deal. Their lives for the most part, is shattered for years and years to come. Let me shed a bit more light the the short sale issue.
Banks are being compelled to go the short sale path rather than pursue foreclosures. Here in Florida in my area this is what the numbers regarding single family homes reveal as a result of this new direction.
Year stats for 2011 Pinellas Count (St Petersburg) FL
Total listed SFH = 3964
Total listed SFH short sales - 1115
Pending SFH short sales - 1459
Closed short sales Jan - Jun - 810 (135 monthly)
Closed short sales Jul - Dec - 1012 (168 monthly)
(Do the simple math and calculate the average time to close on a short sale)
Total listed sfh Foreclousures 197
Total pending SHF Foreclosures 166
Total closed foreclosures Jan - Jun 1456 ( 242 monthly)
Total closed foreclosures Jul - Dec 793 (132 monthly)
Juxtaposing the last six month of short sale and foreclosures you can see the tide is moving towards short sales as a result of these policies.
The opportunity for a home buyer to snag a great deal on a foreclosure seem to be shrinking. The roller coast short sale purchase process will become a incredible burden for any new home buyer to endure.
Fortunately, hard working folks with creative minds are creating solutions to get these homes new owners. And it's not easy. In many cases investors are picking up the distressed homes and providing owner financing to put these displaced owners into. These displaced owners are qualified buyers. The banks refusal to negotiate in good faith resulted in the many short sales of the past...and it was most certainly a big deal for those who were betrayed and whose children found saw mom and dad crying as they watched their options steadily erode as the bank piled on penalties, fees, created ludicrous obstacles and denied any wrong doing.
The BIG DEAL is no one from the BIG BANKs went to the Big House for a few years.
Have a great day,
Heather Paul, Realtor
So these homeowners often end up working together. Some owners hope their tenant's situation will improve to the point they can buy. If not, they're happy to be collecting rent so they can pay on their two mortgages. Short sellers may get turned away. All the better for the owner's who want to rent out their home.
I hope the short sellers are finding their way into a situation they can manage. They are likely to become buyers again when they can set aside enough for a downpayment.
Short sellers can qualify for some loans after two years. The period of time varies with the lender.
If it seems there are a lot of short sales, would you suppose that has something to do with the fact prices have fallen and a lot of home buyers were snagged in this trap? Not everyone used their homes as ATMs. Apparently, enough did to create the situation where short sales are prevalent. Also caught were those who chose to put little or nothing down. The lender often is not taking the hit for these loans. An investor will.
The state of housing has only once been worse. There are usually three parties involved in a mortgage. An investor, lender and borrower. When the borrower struggles to pay their bills, one of those three takes a hit. A foreclosure can cost a lot of money. Sometimes the property is damaged. And, selling or auctioning a property drives down the market. A short sale is not as drastic, not nearly as devastating for the market.
The difference that I see between markets that are mainly foreclosures and short sells is the latter will recover sooner.
PML of Longmont, CO
Home owners now know the other choice will have devastating effect on their credit rpt. If setup right one will be eligible for home purchase as short as 24 months. A skilled listing agent can negotiate with lenders such it has min impact.
As for rent, most renters do not have perfect conditions and landlords will take them. That includes those foreclosed. The rental market is heating up where rent is higher than previous years.
That's why the rental marked is becoming so strong and that's why investors are grabbing up a lot of buy and hold properties nowadays. Most of our investors are looking for good rental properties as they are becoming a coveted commodity in my sphere of influence.
What with unemployment, a very volatile economy, political uncertainty, etc. many short sellers are just happy to sit on the sidelines and regroup for awhile until they can once again see light at the end of the tunnel. I say if you are a buyer looking to occupy a home for the long term, 5 years or more, or an investor looking for a sound long term investment for your portfolio now couldn't be a better time to pull the trigger. 2012 is going to be a good year to buy RE.
You have received a number of very good responses from Annette Lawrence, Grace Morioka, Allyson Alessandro, Dan Tabit, Shanna Rogers, Ron Thomas, Andres Wince and Gabriel Palotas. I will try not to repeat what they said.
People who have contacted me about the possibility of a short sale are often distraught, and often describe their situation like a death in the family. One woman told me that she feels like she has been murdered. People contemplating a short sale have broken down and cried in my office over this. IT IS A VERY BIG DEAL. .
The media talks about "Strategic Short Sales". I have never met a homeowner who ever talked about, and I doubt ever even thought about a "strategic short sale" where they are selling merely because their home is worth less than the loan amount.
The term "strategic short sale" is nothing more than media hype. I suspect that the media use that term to disguise the pain and misery that is felt by people who are about to lose their home.
I have been fortunate enough that the rental market is robust enough that I have not had to lower my standards and rent to anyone who's recently done a short sale.
So as realtors do you have some kind of counseling with your short sell clients? Do they really understand the implications here? I feel like when the market value is less than what's owed the deal "automatically" becomes a short sale.
I am a landlord and I would not rent to someone with a short sale. Why? Because short sale by definition means that you walked away from your obligations.
Rentals. Landlords get to determine what terms they are willing to accept for their tenants. Someone who short sells is not necessarily a bad credit risk. In many cases they may have had a one time event which explains their situation. Loss of job in this economy is the most common, health issues, business failures all are common.