I received an email in my inbox the other day that had the subject line, “The Short Sale Is Dead.” As a short sale aficionado, this subject line definitely caught my attention. (Note to self: When writing emails you want people to read, use the subject line to say that something has died.) So, I continued to click and read and click and read—praying the no spam monster would overcome my computer.
Just a few weeks ago, Fitch Research reported that our national shadow inventory would take over 40 months to clear. Is it all going to go through foreclosure? Is the short sale really dead? Kaput? Gone by the wayside?
It’s hard to say really. Poppy Harlow of CNN Money reported on November 15th that Florida judges are being brought out of retirement in order to oversee judicial foreclosures and are each expected to officiate over twenty foreclosures per hour. So, maybe the foreclosure is back en vogue in some parts of the United States.
Is this good or bad? Well, it all depends upon how you look at it. For homebuyers, any increase in available inventory (like those REOs) will drive prices down. This will be awesome for investors because there will be an increase in investment opportunities.
For borrowers who are upside down or having trouble making ends meet, foreclosures being en vogue may not be such a good thing. Fannie Mae reported in September that they would be penalizing servicers who languish too long and do not foreclose. Long gone are the days when you could postpone a foreclosure the night before with a quick phone call and a promise of a few hundred dollars.
For Realtors®, there will be increased opportunities to take REO listings, and there will still be the opportunity to list short sales—just as long as they market values stay anywhere near where it is now.
But, I have to wonder whether the short sale is really dead. Exactly how large can a bank’s property portfolio become? And since banks are in the business to make money and not manage property, I think that the short sale may still be alive and kicking. It received a recent jolt from the defibrillator when the major lending institutions started halting foreclosures. And, while the robo-signing debacle may be a small Band-Aid on a large cancer, I’d bet dollars to donuts that the short sale will be around for a while.