Morgan Brennan’s recent article in Forbes, Rich Neighborhoods Riddled with Foreclosures, highlights the fact that even homeowners in high end neighborhoods and communities are facing foreclosure.
Here in Massachusetts we’re also seeing an increased call volume for short sales of million-plus dollar homes in towns like Weston, Wellesley, Brookline, Newton, Gloucester, North Andover, South Natick, Sudbury, Concord, Sherborn, Needham, and many other towns.
Many of these borrowers were making big money when the economy was hot but now suffer from a lack of income.
We have found that unlike owners of more modestly priced homes, wealthy homeowners felt the pains of home affordability all the way back in 2008. But because these borrowers had more financial resources to stay in their homes longer, it has taken until 2011 to see an uptick in defaults and those considering doing a short sale.
We don’t agree, however, with comments made in the article from Chad Ruyle, co-founder of www.YouWalkAway.com.
He explains that “wealthier people can’t necessarily qualify for a short sale or loan modification” because there’s too much income on the books.
He’s Right About Loan Modifications but Wrong About Short Sales.
We actually have found that higher end short sales are in many cases easier. Especially up here in Massachusetts where the banks want nothing to do with maintaining a mansion through our cold winters.
Some banks are even paying large incentives to those who decide to do short sales.
The credit recovery time for a short sale vs. a foreclosure is about half the time. The same is true for when you can buy a home again. With a short sale you can buy a home again in 2 years and with a foreclosure it takes a minimum of 4 years.
One key point people forget is that the clock doesn’t start ticking until the short sale or the foreclosure is complete. With foreclosures taking longer and longer to complete (on average almost 600 days in Massachusetts, see graph below) they only prolong the amount of time it takes for the credit healing process to begin.