Finally, on the brink of bankruptcy, Kael said she decided to sell her house at a $100,000 loss. The move would get her out from under a crushing mortgage and save her credit rating, but so-called short sales have proven hard to pull off. Lenders have been reluctant to approve the deals and absorb the loss, even as home values have slipped and foreclosures have become common.
But short sales finally may be having their day.
The number of short sales in Glendale from May through July more than doubled compared with the same period in 2009, from 21 to 45, according to statistics compiled by agent Keith Sorem with Keller Williams in Glendale.
For the region including Glendale, Burbank, La Crescenta and La Cañada Flintridge, the number of short sales grew from 61 over that three-month period in 2009 to 90 in the same timeframe this year.
"It seems like lenders are interested in doing them now," said Judy Schlegel, an agent with ReMax Tri-City in La Cañada Flintridge. "I'm seeing short sales close in a shorter period of time. Buyers who are patient can find a good opportunity."
Real estate broker Meyer Dallal, who helped Kael sell her home in a deal that closed Aug. 2, said short sales are a ticket out of a difficult spot for lenders and homeowners.
Short sales can reduce the loss lenders take on homes, because foreclosures take several months, require costly legal action, often result in decay or damage to the property and cause values of other properties in a neighborhood to sink.
"The amount banks lose in foreclosure is 30% or 40% more than a short sale," Dallal said.
Homeowners, meanwhile, can avoid long-term damage to their credit ratings with short sales.
"With a foreclosure, it affects your credit score by as much as 300 points and stays on your record for seven to 10 years," Dallal added.
Not everyone is qualified for a short sale. The keys, Dallal and Schlegel said, are that homeowners must be able to prove to lenders that their expenses outweigh their incomes, that they are not hiding assets, and that they have a viable hardship — in Kael's case the loss of a job — making it impossible to keep up with payments.
"It can't just be, 'I made a bad investment,'" Dallal said.
Today, Kael is staying with a friend in West L.A. until she can turn things around. The home she invested in is no longer hers, but she is out from under the shadow of foreclosure and years-long credit problems.
"It is something you deal with and then move on as best you can," she said.