In our new housing market I have many people asking me questions about foreclosures and shortsales. I will try to answer a few questions about this subject and then give you a report from the Minneapolis Area Association of Realtors of what is happening in todays market.

What is a foreclosed property? It a real estate property that had a financial lien on it that was defaulted on by the owner and the financial institution followed foreclosure proceeding to gain title to the property. Usaually the default by the property owner goes on for several months before the financial institution begins the foreclosure proceedings. It takes at least six months once the foreclosure proceeding have begun before the financial institution gains the title to the property.

What is a short sale? It is when the encumberances are more than what the property can sell for including costs of sale. If a property has a $200,000 mortgage on it and a buyer was interested in purchasing for $190,000 and the owner doesn't have the money to pay the difference, the owner could contact the financial institution to see if they would accept a payoff of less than the mortgage amount. It is a sale where the bank receives short of what the encumberance is. As a Realtor and training I have received I have helped many a seller in this situation.

Why would a bank consider a short sale? It has been shown that a house that is a foreclosure brings 10 to 20% less than a short sale. Some of the reasons why are that the owner is living in the property and maintaining it, it is not a stripped or damaged house, and it does not carry a foreclosure stigma with it. Also the costs that a bank must go through to cause a foreclosure is very expensive.

Why would an owner consider a short sale rather than foreclosure? A short sale is much better to have on your credit history than a foreclosure. Today banks understand they are better working along with an owner than to work against them in foreclosure. It is a problem solving solution rather than an us versus them solution.

I recently completed course work for my Certified Distressed Property Expert (CDPE) designation. It is a great course work to help owners work with their bank to resolve situations where they are upside down in the property and work with the bank to keep their dignity and problem solve to a much better solution than foreclosure.

Enclosed is the most recent reporty on foreclosures and shortsales in the Twin Cities. Over 50% of current sales are in that catagory. Two years ago it was 6% of sales, one year ago it was 20% of sales that were in this group. It has be estimated by the CDPE Institute that we may have another 2 to 3 years more of this type of sales because of the predatory lending practices of the past 10 years.

Click here to view the report:

http://www.mplsrealtor.com/downloads/market/Reports_Analysis/Foreclosure-Short-Sales_2009-Q1.pdf

I am here to help those who are struggling with financial stresses that have been caused by the forces of this real estate and lending marketplace.