It appears that Bank of America and perhaps some other banks have made some adjustments in determining approval of short sales that is worth noting. In the negotiators’ investigations, they will be looking to see if a seller has continued paying other creditors before releasing them from future liability when they sell their home as a short sale.
What does this mean? This new criteria will likely target people who still have a source of income such as a job or retirement and are thereby paying their bills. These people will need to be prepared to make a cash contribution to the closing or take on a promissory note. Often these notes are at very low interest rates with a reasonable time for repayment.
While there are many people who must sell their property or face foreclosure, it is true that others are taking advantage of the short sale to prevent depleting their retirement funds or other holdings. Often, when the bank negotiates a settlement wherein the seller provides part of the deficit, the seller is actually in a much better position in the final analysis. With the settlement, it is also possible to negotiate with the bank that the sellers’ credit will not be affected. This will then give these people the opportunity to purchase another property and get re-established financially in less time.
Solutions to the economic crisis are not going to be simple. With every effort to respond to a problem, there is an opposite reaction somewhere in the chain. Although there are some people who have managed to create wealth in this economy, the majority have shared in losses and work diligently to make the best resolution possible to mitigate this loss and provide for the future.
Without having history to define the way out of these economic woes, Bank of America and others will make mistakes, but will also get some things right. It is likely much better for a seller to pay a promissory note than allow a property to go to foreclosure where a bank has 10 years to file a deficiency judgment – just when his life has turned for the better.
