Numerous short sales hit local real estate market
By Sylvie Belmond belmond@theacorn.com

As of Wednesday, 50 Moorpark homeowners were attempting to sell their homes at a loss, according to a local real estate Multiple Listing Service.

A short sale occurs when outstanding obligations against a property are greater than what the property can be sold for. If negotiations with the lender succeed, a settlement can be reached to prevent foreclosure.

"It's a lengthy process that can take up to six months," said Tanya Mendez, a Realtor with Troop Real Estate in Moorpark. Homeowners must get approval from lien holders and provide much documentation before the transaction can proceed.

Almost half of the homes listed in the short sale category in Moorpark are now in escrow and 20 such properties were sold in the past 90 days, Mendez said.

People may choose to sell their home at a loss in an attempt to prevent foreclosure if they got behind in payments due to interest rate hikes or if they faced unexpected hardships such as job loss, illness or a death in the family, said Nicole Romanowski, assistant manager for Troop Real Estate in Moorpark.

Others may be compelled to let go of a home at a loss if they incurred excessive debt obligations through cashout refinancing and home equity lines of credit when the market was booming a few years ago.

A local woman who wanted to remain anonymous said she had to make tough choices in an attempt to stay afloat.

The single mother purchased her Simi Valley home in early 2006. She borrowed extra money to make repairs, hoping to resell the house for a profit, but problems with a contractor generated unexpected expenses that compelled her to refinance her loan to complete the work.

The new mortgage turned out to be more costly than she expected because it involved two adjustable loans that started out at 6.7 percent and went up to 8 and 11 percent respectively, said the resident, Her monthly payments increased from about $2,200 to $4,200.

All of this occurred just before the market dropped, so, in addition to having to make higher payments, the resident lost equity when home values declined.

The local mother, who cares for an autistic child and can only work part-time, has been in the short sale process for two months and she's still waiting for a resolution.

"I'm now in limbo. I've been borrowing money for the last 16 months to stay (afloat)."

Loan modifications were not an option for her because they are open only to borrowers who haven't been delinquent.

In the future, she said, she would use a consultant for any real estate transactions.

Some real estate professional endorse short sales and others don't.

Short sales are not a sure thing for sellers, who may end up in foreclosure before the long process is over, said Patty Cappuccino, a Realtor with Prudential California Realty. And they aren't a bargain for buyers since many of the homes need costly repairs before new residents can move in.

"If anybody really needs to buy a home, then short sales are wasting their time," Cappuccino said.

Aside from investors who may benefit from such transactions because they have time and they're not seeking a new residence, homebuyers should consider other opportunities available in today's market, the Realtor said.

It's worth paying a little more for a home sold at today's prices to avoid the uncertainties and delays of short sales, she said, adding she believes the market will rebound within a year or two.

Romanowski saw it differently. Buyers and sellers can benefit from this type of transaction as long as they seek tax and legal advice before they proceed.

"You have to be prepared to roll with the punches," Romanowski said.

"Short pays can be tumultuous and frustrating and you can't predict the outcome, but the flip side is that they can be a tremendous deal for the buyer who pays tens of thousands of dollars less for a home," she said.