We should protest how short sales are reported. That's the thought I woke up with this morning. How was it determined that it's OK for a lender to report adverse credit when the lender approves a short sale? By reporting a short sale as "paid in full for less than agreed," it has a bad effect on a seller's credit report.
Short sales affect credit. One generally does not need to be in arrears to do a short sale. Sellers who are current on their payments do short sales all the time. It's generally the government loans -- Fannie Mae, Freddie Mac, FHA, VA -- that force sellers to stop making their mortgage payments. Sometimes, it's the bank negotiator who makes that decision -- based on her interpretation of the investor guidelines, that the seller needs to be in arrears. But plenty of short sales are granted when the seller is not in default. Why is the seller dinged, then?
A short sale is a private arrangement between a debtor and a creditor. A seller goes to the bank and asks the bank to release the debt in exchange for a lower payoff. The bank can say yes or no. The bank can negotiate the amount, and sometimes does. The bank gets its money. Just not all of it. And the bank is OK with that.
Why make the consumer pay for the exchange of funds by crushing the consumer's credit report? Why is the seller the bad guy? Why does the seller have to suffer? The seller paid the bank.
The seller could have walked away. Let the home go to foreclosure or fall into disrepair. Most of the short sale sellers I meet in Sacramento are responsible individuals. They have a conscience. They care about doing the right thing. They never expected the market to fall or to lose their job. I suspect banks realize this so they take advantage of them. Beat them while they are down.
Beating on the seller does not seem humane to this Sacramento short sale agent. This is sort of like spraying students in the face with pepper spray as they peacefully protest at UC Davis.
We should all write to our legislators. They need a cause to back. This could be non partisan. What do you think?
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
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