Lender-approved sale: New trend?

We've speculated before about whether lenders are actually approving some of the more drastic short sale properties offered on the MLS in South Orange County, because that would mean writing off hundreds of thousands of dollars in losses - per home, in some instances.

The positives: The homedebtor gets rid of the burden of owning the house and avoids foreclosure, the buyer gets a suitable property at a fair price and the bank takes the hit on the sale but does not have to deal with the property in foreclosure.

If banks are willing to let more short sale transactions go through at market prices, we could see escalating price declines and find a bottom sooner than if the banks did not allow short sales and eventually had to sell them months after completing foreclosure proceedings.

Here's some proof some lenders are in fact allowing some extreme short sales to go through - that is, if a willing buyer can be found to pay the approved price. This one is in Mission Viejo.

21145 Foxtail, 92692
Asking price: $555,000
Asking price/ sq ft: $326
Income requirement: $138,750
Purchase price: $740,000
Purchase date: 2/24/06
Size: 3 beds, 3 baths, 1,700 sq ft (built in 1987)
MLS: S519260 (151 days on Redfin)
ZipRealty price tracker: Price Reduced: 1/26/08 -- $650,000 to $620,000
Price Increased: 1/28/08 -- $620,000 to $650,000
Price Reduced: 5/08/08 -- $650,000 to $585,000
Price Reduced: 5/15/08 -- $585,000 to $580,000
Price Reduced: 6/20/08 -- $580,000 to $555,000
Zillow Zestimate: $571,000
2007 property tax: $8,621.88
HOA dues: $68 + $18
Type: Single Family Residence
Stories: 2 Levels
Lot size: 5,200 sq ft
From listing: LENDER APPROVED!! JUST GOT APPROVAL LETTER YESTERDAY!! A FULL PRICE OFFER WILL BE ACCEPTED AND MOVE IMMEDIATLY INTO ESCROW. Amazing two story located on cul-de-sac street. All the upgrades including travertine flooring, granite countertops, ceiling fans, gourmet kitchen and nook! Master bath has duel vanity, seperate stand up shower and tub, beautiful tile throughout. 2 fireplaces!!! Large backyard with huge patio. LENDER APPROVED SHORT SALE!!! HURRY WON'T LAST LONG!!


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This property has been chasing down the market since January, but now its price is lender approved, so don't be surprised if it "WON'T LAST LONG!!"

The owner used 100% financing to buy this property in 2006. First Franklin, which provided the funding, has approved a short sale at $555,000 - a stunning 25% below the previous sales price. Think about that: the lender has acknowledged the property has lost a quarter of its value in less than a year and a half.

We'll assume the real estate agent(s) will take their 6% off the sale of this price. So, if a buyer can be found the current owner will lose no money of their own in the deal since they didn't put any money down. The lender will be out $218,300. The second loan of $148,000 will be completely wiped out, and the first loan of $592,000 also will be affected.

Not a bad deal for the homedebtor; bad situation for the bank. At least it's one fewer foreclosure the courts will have to deal with later.

Oh, and potential buyers might want to make sure this property gets up to date with its 2007 property taxes, since they haven't been paid yet.