The Reason Short Sales Will Meet everyone’s Needs
Certainly the banks are feeling the pinch. Even though the financial institutions receive as much Executive support as the autonomy they are willing to forgo, the ensuing regulation of the financial system means that the banks will be soon laden with policy and procedure.
These polices of course will err on the side of conservative risk management, hardly a surprise after recent months. With Notice of Default (NOD) statistics that are gaining silent momentum, the property market in areas that are not caught by the Federal mortgage bailout scheme – the high-end of the market, will likely suffer a double bottom. Lenders cannot hold off on releasing foreclosure listings indefinitely, and the reason that short sales have recently splashed the property market is due to their ability to allow lenders a release valve outside of the procedural nightmare that is foreclosure.
The South Bay, much like two-thirds of all Californian mortgages, contains properties at the high cost end of the spectrum and ones that overshoot the Fannie Mae and Freddie Mac criteria convincingly. Lenders have been optimistic in the past that the Federal government assistance packages would at some stage bring the higher end of the mortgage market within them, but just as was the case with the car manufacturing industry; it seems there is no political will to bailout someone with a $1 million dollar mortgage.
Further, the sheer debt that the United States labors under may prolong the recession as the US dollar suffers immeasurable punishment in the currency markets. To some extent, industry enjoys a certain inherent protection from currency fluctuations due to its role as a reserve currency for international trade however, at some point the utility of owning US dollars will be seen to evaporate. In this event, there will be little incentive for business investment and recessionary fears may remain protracted as unemployment is sustained at high levels. This in turn will reignite the relentless downward pressure exerted on property by the sheer volume of foreclosure sales. The conundrum is compounded, and an extended period of bumping along the bottom of the property market will be the inevitable.
Properties in the South Bay rarely come within the guidelines for the benefit of mortgage assistance programs, more often than not being placed in the bottom draw by lenders who had hope for some respite. This was not to be however, and soon there will be another desperate lunge by those lenders still operating, to achieve a modest price in an ever unstable market.
For this reason, as the clock continues ticking, lenders will be increasingly more willing to consider offers on short sale propositions that are obtained by mortgagors in the South Bay. In premonition of this fact, many have already commenced formulating an administrative infrastructure within which to affect such property transactions. With reduced delay in decision making and improved access to current market information, lenders will transform the anomaly of the short sale to a streamlined process of remarkable efficiency.
It is in this climate of astute commercial sense, that prospective buyers of quality property in the South Bay will gain great theoretical edge in engaging with the short sale process. From the lenders perspective, a short sale may be the last chance they get to recoup something of an asset that is headed for imminent doom.
