Palm State Mortgage welcomes our readers and friends to an article which explores some of the trends influencing Florida mortgage seekers in 2012.

Three years ago the foreclosures in Orlando peaked, as did short sales. This three year time period is significant because forclosure victims are required to wait three years before trying for another loan with a mortgage backed by the FHA (Federal Housing Administration.)

If they have the courage to try the housing market again, people who lost their homes in 2008 or 2009 could transform into home-buyers in the last half of 2012. In addition to victims of foreclosures, this group could contain home-owners who endured short sales.

Brad Hunter, chief economist for the real-estate research firm Metro-study Inc. said, “Buyers who did a short sale three years ago can once again qualify for an FHA loan.” He added “People who thought three years ago that they would never be able to buy a home again are now finding out that they can.”

Palm State Mortgage has discovered that there were nearly 110,000 homes sold by short sales in the quarter, up 25 percent from a year earlier and comprising 12 percent of all homes sold during the first quarter, according to RealtyTrac. This  means that one out of every four homes sold in 2012 was the result of a short sale situation. This leads to the inevitable question, “What is a short sale?”

Even if you never need or want a “short sale,” we at Palm State Mortgage feel this term has been used in so many real estate news reports, that it demands discussion.

According to Brad Hunter, “In short sales, borrowers who owe more money on their mortgages than their homes are worth, agree with their bank to sell their homes at the lower market value.  The bank agrees to absorb the loss.”

Quick Case Study:  Let us also assume you want to sell your house but it’s worth less than the amount remaining on the mortgage. In this case, a “short sale” may allow you to sell your house and settle your mortgage debt before the bank begins foreclosure proceedings. Although it seems to be a wonderful idea on the surface, a short sale is not always a nice experience.

If you are several months in arrears on your mortgage payment, a “short sale” is an option to foreclosure, perhaps the lesser of two evils.  In the final analysis, you are still losing your home, and your credit rating will suffer.

  • In simple words, a short sale is a transaction in which the proceeds from the sale of the house will fall “short” of the balance of debt secured by the mortgage. Hence, the term is “short” sale. The lender forgives your debt.
  • Why does the lender do such a thing? The answer is that the lender has figured out that they will make more money with the short sale than if they endure the time, trouble and expense of foreclosure.  A short sale can also be accomplished quicker than a foreclosure, which can take years.  During those months or years, property taxes, and insurance continue to build up.
  • On the positive side, with a short sale, you do avoid eviction and you will not lose your house at a public auction. You could possibly qualify for financial assistance to help with relocation costs. We invite you to click here for an in depth resource.
  • On the negative side, it is also possible that neither you nor your property will qualify for a short sale. If it makes more financial sense to foreclose, lenders will choose that option. Check out more information by clicking here. “Short sale” agreements do not alway release borrowers from their obligations to repay any deficiencies of the loans. Such an option must be specifically agreed upon, by the owner as well as the lender.
  • In brief, a short sale is often used as an alternative to foreclosure because, as you can deduce from the above information, it minimizes additional costs to both the lender and borrower.

In our next blog we will  turn our attention to examining some of the fears experienced by all Florida  home buyers, including the newly acceptable victims of foreclosure and short sales.

The aforementioned expert, Brad Hunter blames what he has termed “The Four F’s” for the problems some people are currently experiencing in their attempts to attain a mortgage loan. If you are a mortgage seeker, we will help you turn those “F’s” of fear into “A’s” of assurance.

As always, we of Palm State Mortgage send a big thank you to all 0f our blog readers. Here in the Orlando area, and beyond, we stand ready to advise you about the ins and outs of obtaining a mortgage in a changing economy. Please feel free to “share” us on Facebook, because information should always be free!

We thank you for taking a few moments to read our blog, and we hope you will share us on Facebook. Join us in spreading the word about Florida mortgages in a recovering economy.