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Short sale a foreclosure alternative in South Carolina

The foreclosure crisis continues unabated in South Carolina, and it is expected to pick up steam again. But along with homes that have been foreclosed on, there remains the problem of the "shadow inventory" of homes that have been abandoned but are not back on the market. This phenomenon is attributed to three principal factors: properties repossessed by lenders but not yet for sale, properties caught in the slow-moving foreclosure system and properties where mortgages are in substantial arrears but foreclosure proceedings have not begun.

Approximately one in every 56 Beaufort County homes is in the foreclosure process, an average much worse than those for the rest of South Carolina and the nation. Many of the homeowners are said to be elderly, trying to hang on to their homes until property values improve. Some have sunk their retirement savings into their property to stay afloat until the real estate market recovers. Others have turned to short sales to try and cut their losses.

Foreclosures handled through state court systems take an average of two years to process, even longer in South Carolina. More and more, banks are allowing owners to stay in their properties to avoid liability for property taxes and insurance payments. One observer indicated the problem could take up to 15 years to resolve. The backlog of already foreclosed homes for sale, together with the increasing shadow inventory, has led some lenders to approve short sales. A short sale is one where the lender agrees to a sale of the property for less than the amount owed on the mortgage, forgiving excess debt.

A short sale often makes sense for a homeowner because it allows a quicker resolution and normally has a less negative impact on credit. Banks also avoid costly foreclosure fees, and turn a liability into an asset. The moratorium ordered on foreclosures by South Carolina's Supreme Court in May has made short sales even more attractive.

Source: The Island Packet, "Lost in the shadows: Beaufort County's hidden inventory of homes," Grant Martin, Oct. 22, 2011

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