Why And When Do Creditors Discount
September 16, 2008
Creditors do not discount because they like it. They only discount if they are cornered into the unpleasant situation of loosing in their investment. In other words creditors discount because if they dont they will loose even more. The higher the chance they will get paid at the auction sale, the lesser the chance they will discount, if at all. The lower the chance they will get paid at auction, the higher the chance and amount creditors will discount.
Creditors discount debt secured by real property based on their convenience and risk.- If they will surely get paid they will not discount at all.
- If they will most likely get paid most of what they are owed they will discount somewhat.
- If they will definitely loose an amount but still get something at the auction, they will discount based on how much are they sure to get at the auction. The short sale they will approve will most likely be just above what the creditor expects to get at the auction.
- If the creditor will most likely get nothing at the auction, they will be inclined to discount heavily in order to get a recovery.
In addition, banks and other large institutional creditors, discount according to their own policies. The type of loan also affects a banks ability or latitude for discounting and accepting short sales. This subject will be presented in further detail later in this chapter.
Regardless of the type of creditor secured by the property, the chances of them getting paid at the auction sale are directly correlated to their secured equitable position in the property. All this is reflected it the title report. For the moment it suffices to say that the further down a creditor is in the title report, the less likely it is going to get paid and the most likely the creditor will discount. This subject will be presented in further detail later in this chapter.
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Oscar Morante is a full time real estate investor. He is primarily active in short sales. He teaches how to do short sales in his Short Sales A to Z seminar. This is an intense full day nuts and bolts seminar about the exclusive subject of foreclosure and short sales. To find more information visit http://www.bestshortsales.com
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