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Short Sales Surpass Foreclosures

April 18, 2012 Leave a comment

For the first time, the number of short sales has surpassed foreclosures according to Lender Processing Services Inc. (LPS).Specifically, short sales outnumbered foreclosures in states with some of the largest shares of homes facing foreclosure, including California.

LPS reports that as of January 2012, short sales accounted for 23.9 of home purchases, compared with 19.7 percent for sales of foreclosed homes. This in comparison to January 2011 data that shows only 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

According to Bloomberg, short sale transactions typically fetch a higher price for banks than sales of homes that have gone through foreclosure which is major reason why banks have become more agreeable to selling houses for less than the amount owed on their mortgages

This rise in short sales is likely a result of several new government initiatives.

For example, the Federal Housing Finance Agency ordered loan servicers to respond to all short-sale offers within 30 days, and approve or reject them within 60 days – an effort to short the process that can typically take months longer.

Additionally, banks including Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM) have started providing incentives for homeowners to short sell in an effort to avoid foreclosure.

If you are interested in learning more about short sales check out this blog post for 5 Things You Should Know About Short Sales.

OC Foreclosure inventory at 20-month low

February 17, 2012 Leave a comment

According to the Orange County Register’s Jonathan Lansner, 34% of Orange County homes for sale were distressed properties – foreclosures and short sales.

Lansners reports from Steve Thomas’s ReportsOnHousing.com that states that foreclosure inventory is its lowest since June 2010 and the short sale inventory is its lowest since December 2009.

Lansner’s highlights from Thomas’s report includes:

  • Thomas calculated “market time” — cross of supply and new escrows showing how long, theoretically, it would take to sell inventory. Using that “market time” math, there’s 1.79 months worth of distressed properties on the market vs. 4.07 months worth of non-distressed homes. So, distressed homes currently sell 2.3 times faster than non-distressed homes.
  • 14% of the distressed listings were foreclosures being sold by banks.
  • 86% of the distressed listings were short sales.
  • 53% of the distressed listings were detached homes.
  • 86 of the listed distressed homes were price above $1 million — 3% of all distressed listings.
  • 2,104 of the listed distressed homes were priced $500,000 or less — 78% of all distressed listings.

Also, on the riding low trend: OC home prices. Median selling price for all Orange County residences was $390,000 —4.0% less than a year ago and the lowest since April 2009. The $390,000 median selling price is 40% below June 2007′s peak of $645,000.

Banks pay big money for short sales

February 16, 2012 Leave a comment

To help ease the foreclosure rate, and cut their losses, banks have started paying out big bucks to distressed homeowners on the verge of losing their homes to foreclosure – to the tune of $35,000 a pop. This incentive to homeowners who owe more on their house than it’s worth, or homeowners who are already delinquent on their payments is meant to steer them in the direction of short selling as opposed to foreclosure.

Typically, short sales are avoided by banks since they take a loss on the home but in recent years, it more beneficial to banks to short sell than to foreclose, leaving homeowners, some who have even been denied a loan modification, skeptical at this new approach.

CNN Money reports:

“From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.”

Banks also are acknowledging a long-known fact that short sales command higher prices than foreclosed homes. For perspective, foreclosed properties sold for an average of 22% less than conventional sales in December. Comparatively, the discount for short sales was only 14%, according to the National Association of Realtors.

Whether sellers can expect incentives from their banks depends on multiple factors, including where they live as this program hasn’t been introduced nation-wide, yet. Still, generally speaking, short sales are a great alternative for homeowners looking to avoid foreclosure and have many benefits even if the banks are ponying up the incentive and we recommend speaking with a short sale specialist and attorney to discuss your options.

December home sales improve

January 25, 2012 Leave a comment

There’s at least one sign of recovery in this market: The annual homes sales pace in December reached 4.6 million homes, up 5% from November’s pace and 3.6% from a year ago.

According to the National Association of Realtors on CNN Money, it was the third straight month of improvement in the pace of sales. The fourth-quarter sales volume lifted full-year sales to 4.26 million homes, up 1.7% from 2010 levels.

According to CNN Money:

“Home prices, however, remained depressed, largely because distressed sales continue to make up a significant part of the market.

Realtors said foreclosed homes sold for an average discount of 22% below market value in December, compared to a 20% discount a year ago. Meanwhile, short sales, which are homes sold for less than the amount owed on a mortgage, sold for a 13% discount, compared to a 16% discount in December 2010.

Foreclosures made up 21% of all sales, while short sales were 12%. Both figures were comparable to 2010.”

Joseph LaVorgna, chief U.S. economist for Deutsche Bank, said the current conditions should lead to improved prices and sales in the near term.

Other promising movement: A survey of home builders also showed an optimistic view of current sales conditions and customer traffic and the government’s report on home building is also showing improvement.

2012 Outlook: No Bottom in Sign for OC Condo Market

January 10, 2012 1 comment

Local Orange County real estate agent, Veronica Hicks of CondosEtc., doesn’t see a bottom in the currently OC condo market for at least several years. As part of an ongoing series, Jonathan Lansner for the Orange County Register interviewed Hicks on her thoughts for 2012.

Next year is the last year of the Mortgage Debt Relief act which may affect sales values. Hicks also says there could be another wave of short sales coming in 202 since we still haven’t seen the release of the foreclosures.

Because of this, Hicks expects to see more declines in prices because of a continued short sale trend.  2012 is the last year of the “tax-free short sale” with the expiration of the mortgage debt relief act.  If there are more short sales and the banks release more foreclosure inventory, 2012 and 2013 will probably offer the best deals out there.

Check out the rest of Hicks’ predictions on Lansner’s real estate column.

Foreclosure still taking toll on home prices

December 27, 2011 2 comments

CNNMoney.com is reporting that 46% of homes sold in November were either short sales or repossessed homes, also known as REOs, according to a survey by Campbell/Inside Mortgage Finance.

As distressed homes sell for a lot less than homes sold by conventional sellers, the staggering numbers of short sales and REOs continues to take its toll on the average regular home sale. For example, the average price for a short sale was $209,000 in November and for a regular sale, the average was about $259,000.

With no end in sight on the current foreclosure crisis – more than 6 million borrowers are delinquent 30 or more days, according to LPS Applied Analytics and two million are already in the foreclosure process, most of which will be repossessed or sold as short sales – experts aren’t anticipating any changes in the next couple years on home prices.

Another factor dragging down home prices is the fact that when these distressed homes are being sold at such low prices, mortgage appraisers assessing a regular home’s value typically compare it to short sales and REOs in the area.

Additionally, home values are likely to shed $681 billion in 2012, according to Zillow, a slight improvement from last year.

From MSNBC’s Bottomline:

[T]he unabsorbed pool of housing supply, dragging levels of consumer confidence, high unemployment and negative equity will continue to put downward pressure on the housing market, pushing our expectation for a potential recovery into late 2012 or early 2013,” Stan Humphries, chief economist at real estate research company Zillow Inc., said in a statement.

5 Things You Should Know About Short Sales

December 22, 2011 3 comments

For many homeowners who are facing possible foreclosure a better option is often a short sale.

According to industry researcher RealityTrac, short sales are up 10 percent from the same period last year. While they are becoming increasingly popular for homeowners facing foreclosure, many homeowners still aren’t clear what a short sale is and whether it is the best solution for them.

With help from this article on Christian Science Monitor, we’ve compiled five things you need to know about short sales:

1.   What is a short sale?

A short sale is when a lender agrees to take less than what they’re owed and allows homeowners to sell their property because they are facing financial hardship. Typically, if the property is underwater, that is to say if there is a mortgage balance that is greater than the market value of the home, that property may qualify for a short sale. The homeowner sells the home and the bank marks down the value of the mortgage

However, not every property qualifies as a potential short sale in a bank’s eyes. Lenders will agree to do this if it makes most financial sense for them. According to recent statistics, homes offered as short sales are bought for roughly 20 percent below their market value as opposed to 39 percent under market value for foreclosed homes. Lenders also save on costly foreclosure and maintenance procedures. While short sales are sometimes a better option for the lender, but some investor guidelines make it more profitable for the bank to foreclose.

2.  How do short sales compare to foreclosures?

The biggest difference is how your credit is affected. A short sale, which is carried out similar to any other real estate transaction, does far less damage to your credit than a foreclosure. You may be eligible, under Fannie Mae Guidelines, to buy another home immediately instead of waiting the 5 to 7 years to get approved for another mortgage.

3.  How do short sales compare to bankruptcy?

When faced with foreclosure, some homeowners turn to bankruptcy. In some cases, filing for bankruptcy can be less damaging to your credit profile than having a foreclosure on your record. Filing for bankruptcy will consolidate your debt and can wipe out your liabilities. It will not, however, prevent an eventual foreclosure if the bank has already started the process. A bankruptcy only delays a foreclosure.

If your home is the only debt that is creating your financial hardship, a short sale is probably your best alternative to bankruptcy. Although you can conduct a short sale while in bankruptcy, it requires strategy and a plan. It is best to consult with a knowledgeable bankruptcy attorney and short sale real estate agent before making any decisions.

4.  Are you qualified for a short sale?

To qualify for a short sale, homeowners generally must show legitimate hardship. Common reasons include: death, divorce, loss of job, relocation, etc. Anytime a property is inevitably headed towards foreclosure, a borrower qualifies for a short sale. Also, you can’t be eligible for a loan modification.

The bank is going to want proof in writing that you meet all of these criteria. Getting approved for a short sale can be a long process in itself. If you should happen to find yourself meeting these requirements, find a proper real estate expert who is knowledgeable about short sales. They are different than the average transaction, and it is important that you do your own research.

5. Long Closing Time

Short sale” is sort of a misleading name. It doesn’t refer to the time involved, but to the seller coming up short on the loan payoff. This is part of why short sales can take four to nine months to close, and sometimes even longer. The bank doesn’t just come out and tell the seller how much it would accept for the house, so while the seller and buyer negotiate a price, the seller also has to get that price approved by the bank. Approval can take a long time, and if the bank rejects the first offer, it draws the process out even more.

Lastly, a few things to beware about short sales:

Short sales often involve fewer headaches than losing your home to foreclosure but that doesn’t mean there the process isn’t frustrating. Less than a quarter of short sales actually close and the back and forth between the buyer, the seller and the bank is a big part of the problem. Many frustrated buyers end up walking away from short sales because they get fed up with the process. Even with so many foreclosures on the market, it’s still tough to complete a short sale.

When it comes to short sales, the process can be tricky. If you’re the short seller, the bank can sue you for the loan balance on the home, so it’s important to protect yourself. So-called “deficiency judgments,” in which a borrower can’t pay back a loan, are legal in most states, but not all. Talk to an experienced real estate agent or attorney to find out what the laws are in your state. In many cases, you can require that the bank waive the right to come after you for the difference as part of the short sale agreement.