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Duluth realtors use 'short sales' to help avoid foreclosures

Real estate agents (from top left, clockwise) Gary Kalligher, Jim Ronding, Lynn Nephew and Steve Braman passed a training course in April about how to help homeowners avoid foreclosure by using the practice of "short sales."

DULUTH - Four Duluth Realtors have prepared themselves for the new "phenomenon" in the real estate industry.

Gary Kalligher, the co-owner of Re/Max 1, and three other real estate agents from the agency passed a training course in April about how to help homeowners avoid foreclosure by using the practice of short sales. Kalligher, Steve Braman, Lynn Nephew and Jim Ronding are among the first agents in the Twin Ports to earn the Certified Distressed Property Expert title.

"This will be a huge phenomenon that we will be working on for a long time," Kalli­gher said. "The number of short sales will explode in future years."

The foreclosure avoidance known as short selling helps homeowners get out from under a mortgage that is higher than what the home is worth. The real estate agent lines up a buyer willing to purchase at a lower price than the seller's remaining balance on the mortgage. The lender forgives the loan to avoid the costly and time-consuming foreclosure process. The homeowner is able to maintain a better credit rating by avoiding foreclosure or even bankruptcy.

"We are looking at just missed payments, and that delinquency is erased within two years instead of foreclosure, which can stay on your credit history forever," Braman said.

The number of households in St. Louis County served by foreclosure counseling more than doubled to 586 in 2008 from 242 in 2007, reported the Minnesota Home Ownership Center in April.

The center estimated that nearly 5,000 homes in Minnesota avoided foreclosure in 2008 after receiving free counseling, with savings of about $300 million for homeowners, lenders and local governments. About 26,000 homeowners, or 1 in 32, went through foreclosure in 2008, the center said.

The Duluth Area Association of Realtors doesn't track the number of short sales because disclosing that information during a sale is voluntary, and accurate numbers would be difficult to determine.

Foreclosures can be a headache for everyone involved. It can cost tens of thousands dollars more than short sales and take from nine months to a year to execute. With short sales, the cost is much less, and the process can take from a few weeks to a few months. Kalligher and Braman said Re/Max agencies nationwide want to prepare agents for more short sales.

"It's general knowledge of what we need to get to the lender immediately without e-mails saying, 'We need this.' 'We need that.' 'We don't have this,'" Braman said. "It takes time, and then foreclosure is there, and it is impossible to get the homeowner out. ... Having this designation allows us to stay on top of our business."

Braman said more professional joy comes from helping a family avoid foreclosure than from assisting a young couple buy their first home.

"I feel better about what I'm doing every day," Braman said. "It's more helpful to get people through rough waters."