Trying to get a home to close in a short sale is no picnic. You would think that a bank or lender would be pretty happy to evaluate a bona fide offer—especially one that met their minimum price requirement—but week after week we call and plead for the bank to accept the offer so we can go forward, and week after week they don’t reply.
These processing delays have taken their toll on first-time home buyer interest in short sales, which now account for more than one of every six house sales. In a nutshell, I listed a house last spring—about a year ago. It is a fixer-upper, no doubt. But the county had it assessed at $119,000. We listed it at $99,000 with the idea it would sell fairly quickly.
Buyers came and went and finally one with vision and a belief in the neighborhood came forward and has made an offer that should be acceptable to all. And now the bank is not returning the calls. To be fair, there is a newly hired individual at the other end of the phone charged with selling many many homes. I’m hoping we’ll hear something this week.
But it’s not just me, first-time homebuyer purchases of short sales dropped to 39.7 percent of short sale transactions. That represented a three-month slide and was the lowest level for first-time homebuyers ever recorded by those who keep track of this stuff.
The first-time homebuyer share of short sales hit a peak of 54.1 percent of all short sale transactions in November 2009, just before the originally scheduled expiration of the federal homebuyer tax credit.
Short sale transactions have long been problematic for buyers and sellers alike, with typical approval times of several months after a homebuyer first submits an offer. Factors slowing down short sale approvals include lost paperwork, coordination with multiple investors, slow appraisals, and mortgage servicer understaffing.
But there is a silver lining to this whole debacle, for many first-time home buyers, average short sale prices of 27 percent lower than non-distressed properties compensated for the wait time. But with average time-on-market for short sales stalled at 16.6 weeks—with the majority of that time spent waiting for bank approval—short sale transactions are becoming less popular with first-time homebuyers.
Short sales are just one type of distressed property. Homes that have been foreclosed on become the property of the lending institution, and are called “REO’s” (for Real Estate Owned) with damaged REO’s and move-in ready REO’s also being significant components of today’s housing market. Last summer, short sales accounted for 17.1 percent of the home purchase market, with damaged REO and move-in ready REO accounting for 13.2 percent and 15.6 percent, respectively.
Most real estate agents indicate that home buyers frustrated with short sale delays are resorting to placing offers on multiple properties, with the intention on closing on the first one that is approved. This practice can bog down the short sale approval process at mortgage servicers.
To review the listings, sales and “days on market” data, you can take a deeper look here: To View .
Dane Hahn is a real estate professional practicing in the Englewood area. He can be reached at dane.hahn@gmail.com; or on the web at http://www.danesellsflorida.com/.
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