Despite having a bad wrap for often being slow and problematic (well at least for those who don’t use LA City Short Sales), short sales are quickly becoming a preferred method to dispose of distressed properties and avoid foreclosure.
According to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, short sales accounted for a substantial 15.9 percent of home purchase transactions in January. This was well above the share of other distressed property activity – with damaged REO accounting for 13.4 percent of activity and move-in ready REO making up 13.8 percent.
The January figures represent a steady increase in short sale popularity. As recently as November of 2009, short sales accounted for 12.4 percent of the home purchase market, according to the Campbell report, behind move-in ready REO at 12.6 percent and nearly even with damaged REO transactions at 12.3 percent.
Short sales are an effective method of resolving mortgages in default, both for large lenders and for the government agencies supporting lenders’ efforts. Short sales typically result in lower lender losses and houses left in more saleable condition.
In addition, borrowers that agree to a short sale escape the bad credit marks of a foreclosure and can often buy another house with mortgage financing after only two years. For borrowers going though the foreclosure process, mortgage financing can be unavailable for a period of five to seven years afterward.
Short sale properties are most often purchased by first-time homebuyers, the January survey results revealed. Currently, mortgage servicer approval on offers
for short sale properties can take several months, making these transactions difficult for current homeowners who often need to conduct not one, but two, transactions in quick succession to also sell off their current residence. In contrast, first-time homebuyers more often have flexibility around the timing of short sale closings.
“Short sales activity took a temporary dip in November around the expected expiration of the first-time homebuyer tax credit,” reported Thomas Popik, research director for the Campbell/Inside Mortgage Finance survey. “Few first-time homebuyers wanted to take the chance that their short sale transaction wouldn’t be approved by the November 30 deadline. But now that the tax credit has been extended, we see first-time homebuyers once again snapping up attractively priced short sales.”
The survey results showed that short sales typically sell for 91 percent of the listing price. In contrast, move-in ready REO sells for 99 percent of listing price, on average.
Short sales are becoming particularly attractive in some of the hardest-hit housing markets. As DSNews.com previously reported, 21.1 percent of all existing-home sales in the foreclosure-ravaged Las Vegas area last month were short sales.
According to recent report from the local FOX news agency in Phoenix, Arizona lawmakers are currently considering a bill that would mandate realtors there learn short sale strategies. The state’s Short Sale Task Force is recommending that the Legislature require local agents to take 15 hours of short sale classes so they can successfully navigate the process.
To help the industry meet growing demand for this increasingly popular foreclosure alternative, The Five Star Institute (FSI) will be hosting a Short Sale Summit in Las Vegas on March 12 as part of its West Coast 2010 Spring Training. The day’s full agenda will be dedicated to helping agents and other real estate practitioners master the art of short sales, and upon successfully passing a course exam, attendees will receive The Five Star Short Sale Certification.
In addition to the full-day summit on short sales, FSI’s 2010 Spring Training will be held on March 10, 11, and 13, and covers such areas as building an REO business, mastering broker price opinions (BPOs), and working with the distressed borrower.
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