Ok, maybe short sales won’t save the planet (does that mean that I don’t really need to finish designing my superhero outfit for Captain Short Sale, or maybe The Mighty Short Sale Warrior? I was kind of digging the yellow cape). Anyway, short sales may not stop a speeding train or fix our banking system but they will certainly play an important and growing role in restoring the housing market to a balance.
Let’s look at the present situation: Millions of properties are in the foreclosure pipeline and millions more are poised on the brink. Properties are underwater to the tune of 20% to 40% and more. Almost a million foreclosed properties (REOs) are on the market and still more being held back in inventory awaiting the completion of the Presidential election and a more favorable market. On the bright side, the economy is moving in the right direction, interest rates are at an all-time low, buyers are out looking for bargains and investors are starting to get back in the market. Add to the mix a 25 billion dollar settlement with the “Big 5” banks and we have ourselves a real rodeo.
Now these Big 5 banks were just put through the public relations wringer and a big dip into their rather deep pockets because they screwed up on how they were handling the foreclosure process for mortgages. The funny thing is that they did not even own most of these mortgages……they were just the Servicer on most of these files. With their most recent experience I know that these banks now have even more incentive to take short sales. Why? 1) Short sales are a much faster solution than a foreclosure; 2) banks/lienholders recoup substantially more of their investment in a short sale than in a foreclosure; 3) The banks avoid the public stigma of the “foreclosure bullies”; and 4) The banks avoid the growing nightmare and expense of taking title to the properties and the accompanying title issues. Short sales by comparison are quick, clean, more lucrative and quiet.
What does that mean for real estate agents and the market in general…?
…Homes in better condition, higher prices and shorter time (in years) to the housing market recovery. The huge and often overlooked bonus is that today’s seller is in much better condition financially, emotionally and credit wise with a short sale than a foreclosure. It is a speed bump in their lives rather than a possibly life altering financial and emotional event. I believe it is also important to point out that today’s seller, if properly helped, is tomorrow’s buyer. A mistreated and disrespected seller (insert FORECLOSURE here) will be out of the market longer…..if not forever.
Wow, maybe we should all reconsider our yellow capes.