Foreclosure ‘Flood’ Forecast: Slew of Short Sales Sit Still | Print |  E-mail
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Friday, 24 February 2012 14:22


Real Estate Reality


By Carl Medford, CRS
Special to the Forum

 

 

 

 

News that the five biggest banks cut a Foreclosure Abuse deal with the Feds to the tune of $26 billion has revitalized rumors of a new flood of foreclosures.

 

Just last week, RealtyTrak, publishers of the largest database of foreclosure, auction and bank-owned homes in the country for investors and homebuyers, claimed foreclosure rates kicked back up immediately after the landmark settlement was inked.

 

Based on what Realtors are seeing here in Central Alameda County, there has not been a flood of foreclosures, nor do we anticipate seeing one.

 

The reason is simple: while there is certainly no shortage of distressed homeowners who cannot meet current mortgage obligations, banks are growing increasingly willing to cooperate with a short sale instead of taking back the homes. So, while we don’t anticipate a “flood” of foreclosures, many are looking at projected increases in short sales calling 2012 “The Year of the Short Sale.”

 

While good news for sellers, buyers are not very excited about this development. In fact, there is a growing level of push-back from buyers who don’t want to see short sales. As chronicled in the past in this column, short sales have a number of inherent issues.


 

Issue No. 1: They often appear with artificially low prices designed to get buyers to write. In a move labeled by many as “bait-and-switch,” banks come back at acceptance time and raise the accepted price to market levels. Many buyers bail at this point, either unable or unwilling to pay the higher price.

 

Issue No. 2: The inability to access many short sales: an astoundingly high percentage don’t have lockboxes, making it almost impossible for buyers’ agents to show short sale properties to buyers on the buyers’ schedules. There doesn’t appear to be any good or logical reason for this. Everyone knows that to sell a home quickly for top dollar, you need ready access.

 

Issue No. 3: The length of time banks take to actually process short sales. The market average is still approximately six months. Given the choice between a normal sale, foreclosure or short sale, buyers will avoid the short sale and go after lower-hanging fruit.

 

Bottom line? While we can anticipate a significant uptick in short sales in the months to come, we also predict an increasing resistance to short sales by buyers. Unless, of course, banks can get their acts together and make sort sales… well, short.

Don’t hold your breath.



 

Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley. This article is sponsored by the Central County Marketing Association at www.ccmgtoday.com


 

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