Unfortunately, the answer is "yes". "Short Sale" is currently among the top-searched terms related to title services, in Louisville and nationally. See the inset graphic from Google Trends, showing the enormous peak in "short sale" searches in January, 2021, and maintaining higher relative search than "title search" and "title insurance", which you might expect to be our most searched terms in the Title Agency market. So, we say, "unfortunately yes," because short sales are sadly increased in a market where home owners are experiencing more financial distress, and lenders are increasingly foreclosing on mortgaged homes. We see in the Google data that Kentucky is third highest in the country for the trending level of "short sale" searches. From our experience at Agency Title, it reflects the increased phone call volumes in our offices across Louisville, Bardstown and Southern Indiana. Before we go further about local impact, let's back up and define the term.
What is a Short Sale?
A short sale in real estate is when a home owner sells their home for less than they still owe for the home loan. Why would they do that? This is usually because they have become unable to make the mortgage payments, and they want to avoid losing the home in foreclosure to the mortgage lender. The home owner needs to get out of the debt to the lender, and avoid a foreclosure in their credit history, so they sell the home at the best (or first) offer they can get, but the payment goes directly to the lender.
So, if the home owner sells for less than they owe, do they still owe the rest of the loan to the lender? The answer is increasingly, no. Historically, the lender had two options: to forgive the balance of the loan, or to offer terms by which the former home owner can pay back the balance. States have put more and more pressure on the lenders to forgive the balance of the mortgages in short sales.
In 2007, the U.S. Congress stepped in with the Mortgage Debt Relief Act. Previously, the former home owner would have had to file a 1099 for the forgiven amount of the remaining loan, therefore reporting it as income, and getting taxed on it. But the new legislation waives any financial obligation with completion of a 982 Form.
A short sale is essentially the best outcome that the lender and borrower can both make out of a mutually undesirable situation. The lender doesn't want less than they are owed, but if they foreclose, they have those legal and transactional expenses plus a potentially below-market price on the home, which then negatively impacts home value in the neighborhood. Similarly, the borrower doesn't want to go further into debt when they are in financial distress, or to have a foreclosure on their financial record. The lender has to agree to the short sale, and the former home owner wouldn't likely short sell anyway, without first securing forgiveness of their mortgage debt.
What is the Impact of Short Sales, Locally?
"I am receiving a lot of phone calls about short sales now. They have definitely increased," says Beth Rojas, Owner of Agency Title, Inc. As a preferred Louisville Title business since 1995, Agency has become a trusted source of handling Short Sale Title Services with as much compassion and understanding as attention to detail, to ensure that the potentially tense situations result in the best possible outcomes for both lender and borrower.
"All Short Sales are unfortunate situations," says Beth, "But it does help the former home owner prevent foreclosure, which they want to avoid. Plus, in preventing a foreclosure, the community can also benefit by not having a foreclosed or distressed home in the neighborhood."
Local real estate agents, home owners, mortgage brokers and lenders appreciate how important it is to have a Short Sale resolved efficiently and with the greatest assurance of having the legal and title work completed to the letter of the law with the title secured. In the Louisville area, Agency Title appreciates the responsibility of being at the top of search results for "Short Sale Title Services Louisville", due to experience and reputation, so we approach every Short Sale (as with all other title services) with dedication to service, accuracy and compassion.
Contact Agency Title for Short Sales, and for all of your title needs.