Top four distressed property buzz words

Short Sale Primer

A buzzword is an informal term for a fashionable word or phrase, and we have lots and lots of those in the distressed property arena right now. Words that we use change from year to year. As you move into 2012, you may finding yourself using these terms more and more—especially as you continue to deal with distressed borrowers.

Escalate: Normal people hear the word escalate and think of an elevator and their next trip to the mall. Distressed property enthusiasts and short sale processors often need to take their files up a notch—when the bank’s loss mitigation department is not effective. This process brings new meaning to the word escalate.

Upside Down or Underwater: I’m not talking about your next headstand in yoga class or a scuba diving excursion. Upside down (or underwater) refers to a situation where a borrower owes more on a mortgage (or mortgages) than the property is worth. We’re now over 4 years into this unique and challenge real estate market, and there are still many homeowners who are upside down, and may need to sell their homes in a short sale.

Shadow Inventory: Lots of distressed property enthusiasts talk about the famed shadow inventory. In fact, the phrase has a few different meanings in today’s market: 1) homes that have been foreclosed and are currently awaiting resale (not yet on the market); 2) homes where the owner is behind on payments; and 3) homes where the owner is thinking of selling but is waiting for the market to improve. Sadly, according to Corelogic, for every two homes available for sale, two are classified as “in the shadows.”

Strategic Default: This neologism refers to a situation where a borrower strategically plans to stop making mortgage payments and let the property go into foreclosure. Knowing that a property is underwater and may not recoup its value for several years, some borrowers are fed up and decide to participate in a strategic default. Interestingly, many of these borrowers can successfully complete a short sale on their properties.

I remember the days when the buzzwords I used were wicked, awesome, for sure, and totally. Who woulda thunk that now I use words like shadow inventory and strategic default. You think you will be using those terms in 2012? I’m kinda thinkin’ that you will.