The Adobe Flash Player is required to view this multimedia interactive. Get it here.

Short sale prevents foreclosure for some homeowners

Cracker Barrel manager accused of embezzling $2K
7:13 p.m.
Frozen yogurt shop offers frenzy of flavors, toppings
5:58 p.m.
Wright-Patterson relatively unscathed in Obama defense budget
4:55 p.m.
Dayton Mall shoe store moving
4:32 p.m.
Is your “unlimited” data being throttled?
2:32 p.m.
> More headlines

By Lawrence Budd, Staff Writer Updated 1:43 PM Friday, June 19, 2009

A four-bedroom, 2,500 square-foot home in the Springboro school district was listed for sale this week for $210,000 — $46,000 less than the owners agreed to pay less than three years ago.

The “short sale” was listed by Mark Ryan, one of a growing group of Dayton-area real estate agents specializing in this expanding segment of the U.S. housing market.

Experts say the short-sale segment is the result of the combined effects of downturns in the housing market and economy, coupled with personal problems such as job loss, medical problems or divorce.

Through short sales, homeowners headed for foreclosure can limit the impact on their credit ratings and more quickly qualify to buy another home.

Lenders fall short of collecting the full mortgage amount, but avoid the costs of carrying and reselling the house — big pluses in a glutted market.

“It’s not a good choice. It’s the best of a lot of lousy choices,” said Ryan, broker and senior partner for Re/Max Victory at The Greene.

The National Association of Realtors is still developing its first data set on short sales, an alternative to foreclosure for homeowners who don’t want to remain in the home.

Preliminary research indicates about 13 percent of all home sales in early 2009 in Ohio were short sales, putting the state in the 10- to 20-percent range reported for short sales nationally, according to the National Association of Realtors.

Roughly one in three “distressed” sales — homes sold for about 20 percent less than in conventional deals — are short sales, rather than foreclosures, according to association estimates.

If this is true, this year in Montgomery, Warren, Butler, Miami or Greene counties, about 5,000 homeowners could wind up short selling, based on foreclosure statistics provided by First American CoreLogic, a provider of real estate data.

Less profitable and more time consuming than traditional home sales, short sales also require greater cooperation by the all the parties involved — particularly if a court-imposed deadline has been set on the foreclosure.

“We’ve got to beat the deadline of the sheriff’s sale,” said Sham Reddy, an agent with Re/Max Spirit in Beavercreek. Owners must provide exhaustive, complete information proving the financial hardships justifying their consideration for a short sale.

Title companies gauge the extent of homeowner liabilities, including second mortgages, credit-card judgments and other liens, by searching back 42 years on the title to determine how much money will be left at the closing.

This net-proceeds figure is a key factor used by lenders in deciding whether to close the short sale, rather than absorb the costs and problems that come with foreclosure and resale.

Despite the shortage of traditional home-sale opportunities, some real estate agents “choose to starve rather than do something different,” said Reddy, who teaches lessons he learned in seven years handling short sales is seminars for area agents.

Reddy, who has developed a network of investors willing to buy the short sales, handles all facets of the deals. He estimated he’s worked on about 300 short sales — about half successful — in Montgomery County.

Ryan, who’s worked on deals from North Dayton to Beavercreek to West Chester since concentrating on short sales in the past year, uses a team approach. He works with the homeowners, while other team members identify potential buyers and prepare packages of information easing the workload for loss-mitigation specialists working for lenders.

Sometimes a bottleneck develops, as the lenders’ representatives juggle numerous cases.

“You’ve got one processor sitting in an office with probably 300 files,” Chris Cartwright, CEO of Landmark Title Agency South in Centerville, said.

“I think they’re overwhelmed. I don’t think they’re unwilling.”

On Friday, June 19, Janet Mulcare of Irongate Realtors in Springboro reported a lender she’d been working with on a short sale for six months on behalf of a client backed out of a deal.

Shekila Belton recalled a potential buyer backing out before Reddy managed to close a short sale in December 2007 on a home on Nicholas Road in Dayton she was losing due to rising payments tied to an adjustable mortgage. Out from under the home, Belton pursued a career as a respiratory therapist.

“I was able to finish school. I have a good job now,” Belton said. “It didn’t hurt my credit report.”

Sometimes unpaid income or property taxes or other debt complicate negotiations. Lenders sometimes agree to $1,000 payments to clear second mortgages, keep owners from leaving homes vacant or to offset moving costs.

“Every short sale is different,” said Cartwright, whose firm also began offering courses on short sales early last year.

Contact this reporter at (937) 225-2261 or lbudd@DaytonDailyNews.com.

Share this article