Defibrillating the Short Sale

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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.

Photo: nggalai

About Author

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®. Before landing real estate, she had careers in education and publishing. Many folks say that Melissa is genetically pre-disposed to success with short sales. In fact, last year she and her staff obtained over 500 short sale approval letters! When she isn’t speaking with lien holders, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

4 Comments

  1. In my opinion, with the increased scrutiny in foreclosure proceedures and the increased costs therein, I believe short sales will have a revival in the coming months. This revival, will also be due in part to the fading of the comparable sales valuations from the first three quarters of this year which were propped up by the tax incentives. With the tax incentives expired and the increased expenses in foreclosure processing, I believe that the net proceeds over REO should once again support a short sale sceanrio. The other factors you cite in your articles will also strengthen my argument. The banks and servicers have been taking the path of leat resistance and now that some states are fighting back, I believe short sales are back on the table.

  2. Ana Natasha Phillips on

    I do not think that short sale are on their way out, Banks are just not in the business of property management . They are in the in business of lending money. So I agree with the author of this article in his assessment , that they may not be here forever but they are going to be here for a long time to come.

  3. Bank should have been aware of tax liens, and should be willing to sell house to get it off their books. Unless they think your appraisal was suspect, they won’t be able to get more for it, except in a cash deal. So don’t give up on it yet. Hope that helps, I’m always trying to learn more and get better so I look forward to hearing other responses.

  4. Very interesting article, I loved it. I do think Short Sales are far from dead. I am seeing lenders and servicers being more cooperative than ever before and moving them even faster. But I also think foreclosures will be there as well so we have to be prepared to take on both. Much success to you and your team, my warmest regards to all of you. Happy Holidays!

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