A Lifesaver for Underwater Homes

After losing her job and then unsuccessfully trying to sell her Auburn home for a year and a half, Jeanine Washington is frustrated. She has already defaulted on her loan payments, and it increasingly looks as though her only remaining options are foreclosure or bankruptcy.

But there is still a third option. It's a long shot, but she's crossing her fingers. She hopes the two banks holding the mortgages on her four-bedroom home will agree to engage in a short sale with a buyer she landed in April.

Never heard of a short sale? It's where a bank agrees to accept less than the full amount owed on its loan in order to avoid the troubles and cost of foreclosure. It's a term that's becoming increasingly common as the recession takes its toll on those who have lost a job and are trying to sell their home because they can no longer afford it, but owe more on the property than it's worth.

Jeanine's hopes are slowly diminishing because her short sale deal has stalled. "I think I will still be sitting here six months from now, waiting," she says. "And I'm probably going to lose my buyer. I need to move on but I can't because I have this on my back."

Jeanine Washington is just one of nearly 75,000 homeowners in the state who have faced foreclosure since the beginning of 2007. Unemployment here is moving into the double digits, and the gap between the number of houses for sale and the number that sell each month continues to widen. The number of people filing for personal bankruptcy protection jumped a whopping 70 percent in the first half of 2009.

Unable to sell their houses and make their mortgage payments, some distressed homeowners are negotiating loan modifications with their banks. Others are tapping into their credit cards and retirement accounts or hope to land a new job to right their economic ship.

THE SHORT SALE

A small but growing number of homeowners is turning to a new kind of company to guide them through these waters. Short sale investors are those individuals or companies that buy houses for less than the outstanding mortgages.

While a short sale is not an ideal outcome, it provides a way of resolving a tricky problem that is less bad than others. The investors-companies such as Bellevue-based Washington Property Solutions

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