The Valley of the Sun has many underwater homeowners desperate to do a "short sale"- that is, they are working with the lender to sell the home for less than they owe. But they odds are less than one in ten they will succeed:
More than 7,000 homeowners facing foreclosure in the Valley are trying to sell their homes through a process known as a short sale, according to Arizona Regional Multiple Listing Service data.
But less than 5 percent manage to sell before lenders seize their houses.
The failure by banks and homeowners to agree to a short sale – to sell a home for less than the amount still owed on the mortgage – is adding to the Valley’s growing foreclosure problem.
And the government’s recent financial-bailout package to help alleviate the nation’s housing crisis will do little to address the problem of short sales.
When homeowners whose property values have collapsed fall into arrears on a mortgage, short sales allow them to negotiate a deal with their lender to sell their home for less than they owe and avoid foreclosure.
An increase in the number of short sales could slow the Valley’s record foreclosure rate, which has yet to peak.
Lenders remember, now have the possibility of offloading their bad assets to the Treasury- and at prices more than they are worth. There is now a big disincentive to arrange short sales. Even before the bank bailout, lenders have not been aggressive to work with buyers to do short sales.
Theoretically the housing bailout bill was supposed to help this situation, but no one trying to do a short sale should hold their breath.