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1. Short Sales Will Increase Dramatically in 2012 http://www.kcmblog.com/2012/05/07/short-sales-will-increase-dramatica...
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Short Sales Will Increase Dramatically in 2012
by The KCM Crew on May 7, 2012 · 4 comments
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We believe that short sales will be a major part of the real estate market in 2012. That is why we have
dedicated this entire week to posts exclusively on this subject. We hope that by the end of the week you have
a better handle on the need for short sales and a better understanding of the process. – the KCM Crew
It seems that the banks have finally realized that a short
sale is a better option than foreclosure for them, the homeowner and the neighborhood. It is for this reason we
believe that 2012 will come to be known as the year of the short sale. CNN Money reported on this exact
point:
“We believe 2012 could be a record year for short sales,” said Daren Blomquist, vice president
at RealtyTrac.
Banks are showing signs of being more open and willing to approve the deals — even if it means
accepting less money. The average sales price for a short sale was $174,120 in January, down
4% from December and 10% year-over-year.
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2. Short Sales Will Increase Dramatically in 2012 http://www.kcmblog.com/2012/05/07/short-sales-will-increase-dramatica...
Market Watch also addressed the short sale situation recently:
Fitch expects the increase in short sales to continue because of the potential benefits afforded
to both lenders and borrowers. Some borrowers may prefer short sales because, though they
cannot stay in the property, they often walk away with cash incentives from lenders and
healthier credit reports unmarred by foreclosure. For lenders, short sales provide a more
efficient and cheaper alternative to the increasingly lengthy and costly foreclosure process.
Why Are the Banks Now Leaning Towards Short Sales?
The simple answer is that the banks lose less money when doing a short sale. The CNN Money article
mentioned above explains:
Typically, banks get about 20% less for a foreclosed home. Foreclosure can also take years to
unload, during which expenses, like property taxes, insurance and other expenses, mount up.
The Market Watch report breaks it down further:
Short sales…are currently getting completed 20 months after the last payment made on the
loan, approximately 10 months less than the average time to foreclose. Shorter timelines reduce
lenders’ carrying costs (i.e. accrued loan interest and property taxes, insurance, and
maintenance) and eliminate most of the legal expenses associated with foreclosure and
liquidation. As a result, loss severities tend to be considerably lower. Historically, for loans
with similar attributes, short sales have severities 10%-15% less than REO sales. As the
proportion of short sales increases, we expect average loss severities to improve further.
How Many Short Sales Could Be Completed?
JPMorgan has projected that over 500,000 short sales will be done this year. Also, NECN.com recently
reported:
RealtyTrac estimates that if the January numbers it found hold up, there would be about
105,000 “pre-foreclosure” sales of homes, most of them short sales, during the first quarter of
this year, and at that rate something like 400,000 for the year.
How Long Will Short Sales Be a Major Part of the Market?
The NECN article shows us that short sales are here to stay for some time.
According to the Mortgage Bankers Association, there are nearly 3.5 million homeowners
delinquent on their mortgages by at least one month, including 1.5 million who are 90 days or
more behind on paying their mortgage. And there are 12.5 million homeowners still who are
“underwater,” owing more on their mortgage than their home is worth. That suggests that at the
current rates, barring some spectacular economic recovery, it would take years, even decades,
for short sales alone to clean up the mortgage mess that remains.
Short sales are here to stay. We must accept this fact and work hard to learn the process and apply it where it
makes sense.
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3. Short Sales Will Increase Dramatically in 2012 http://www.kcmblog.com/2012/05/07/short-sales-will-increase-dramatica...
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We at The KCM Crew are pursuing our mission of building a home for real estate information. We are truly
dedicated to helping real estate professionals by supplying all the tools and resources they need to be seen as
industry leaders in their marketplace. See how we can help you become an industry leader in your
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4. Short Sales Will Increase Dramatically in 2012 http://www.kcmblog.com/2012/05/07/short-sales-will-increase-dramatica...
5 comments •
Discussion Community "
David Mott • 2 months ago
Are appraisals still coming in at below replacement value? Would the term "underwater" be
applied in these cases ?
0 • Reply • Share ›
KCMcrew MOD • 2 months ago • parent
A short sale is determined by the mortgage amount versus the appraised value of the
home. The appraisal used is market value not replacement value.
0 • Reply • Share ›
David Mott • 2 months ago • parent
Thank you KCMcrew and thank you for a great blog!
So, if the market appraisal comes in below price to build or replacement value (as currently
used in insurance coverage), is that market appraisal value used in the count of
"underwater" homeowners?
In other words, could the insurance companies be overcharging along with the tax office or is
the current appraisal process in a disconnect with the 'real world'?
Somebody thinks a lot of homes are underwater based on the mortgages they are paying
relative to market value, but I wonder what the insurance companies think about that. I also
wonder why builders won't build.
I'd love to see a real world pricing candle chart with insurance (cost to build or replace), tax
values and appraisal values all together.I know that location is most likely a big variable, but
stripping that away what might the value be as shown by the 3 separate appraising entities.
0 • Reply • Share ›
Bonnie Aubin • 2 months ago
Banks finally see "long" term benefits of "short" sales vs. foreclosures. Although fewer in number,
I'm wondering if those lenders holding second trusts will also begin to see the light?
0 • Reply • Share ›
Rpace • 2 months ago
What a way to start our week. Only kidding, information is King. Thanks KCM
Bob P
0 • Reply • Share ›
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5. Short Sales Will Increase Dramatically in 2012 http://www.kcmblog.com/2012/05/07/short-sales-will-increase-dramatica...
Previous post: Prices: 1Q 2012 vs. 4Q 2011
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About to Turn ~
kcmblog.com/2012
/06/26/exp… via
@KCMcrew
4 hours ago reply retweet
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CRSConnect
Infographic: Under-35
Population Staying
Home Not Buying One
ht.ly/bL2Bw via
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3 days ago reply retweet
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CDPE Which is Better:
A Rental or Your Own
Home? @KCMcrew
pinterest.com/pin
/2124433073…
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alexcharfen Great info
from Steve Harney!
#charfen @cdpe
@KCMcrew Short Sales
Skyrocketing
bit.ly/LyWIvS
6 days ago reply retweet
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HoulihanRE "Shadow
Inventory" falls to
levels not seen since
2008 according to this
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