Short sales will increase dramatically in 2012


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Short sales will increase dramatically in 2012

  1. 1. Short Sales Will Increase Dramatically in 2012 Blog What is KCM? Our Mission Contact Us Short Sales Will Increase Dramatically in 2012 by The KCM Crew on May 7, 2012 · 4 comments Tweet 244 Share 726 Share 135 11 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.1 of 8 6/26/2012 10:59 AM
  2. 2. Short Sales Will Increase Dramatically in 2012 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, 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.2 of 8 6/26/2012 10:59 AM
  3. 3. Short Sales Will Increase Dramatically in 2012 11 726 244 Share Tweet About The Author 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 marketplace, and be sure to check out our page on Facebook and follow us on Twitter.3 of 8 6/26/2012 10:59 AM
  4. 4. Short Sales Will Increase Dramatically in 2012 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 wont build. Id 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, Im 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 ›4 of 8 6/26/2012 10:59 AM
  5. 5. Short Sales Will Increase Dramatically in 2012 Previous post: Prices: 1Q 2012 vs. 4Q 2011 Next post: Are You a Buyer Looking to Purchase a Short Sale? Search For Posts Popular Posts Short Sale vs Foreclosure – 10 Common Myths Busted Will Mortgage Forgiveness Debt Relief Act Be Extended? The Unspoken Appraisal Problem Everybody Calm Down! The Sky Is NOT Falling Home Prices: It’s About Supply & Demand New Single Family Homes: 2011 vs 2006 Another Positive Report for Real Estate Want More Articles? @KCMcrew on Twitter tonymaurer Experts Say Housing Prices Are5 of 8 6/26/2012 10:59 AM
  6. 6. Short Sales Will Increase Dramatically in 2012 About to Turn ~ /06/26/exp… via @KCMcrew 4 hours ago reply retweet favorite CRSConnect Infographic: Under-35 Population Staying Home Not Buying One via @KCMcrew 3 days ago reply retweet favorite CDPE Which is Better: A Rental or Your Own Home? @KCMcrew /2124433073… 4 days ago reply retweet favorite alexcharfen Great info from Steve Harney! #charfen @cdpe @KCMcrew Short Sales Skyrocketing 6 days ago reply retweet favorite HoulihanRE "Shadow Inventory" falls to levels not seen since 2008 according to this @KCMcrew article: 7 days ago reply retweet favorite Join the conversation The SHI SHI (shē) n. the spiral adopted by Keeping Current Matters that symbolizes the continuous change of real estate and its current practices. The KCM Connect6 of 8 6/26/2012 10:59 AM
  7. 7. Short Sales Will Increase Dramatically in 2012 The KCM Crew Like 12,675 people like The KCM Crew. Bill Pam Paul Barbara Jonathan Pati Evan Vance John May 2012 M T W T F S S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 « Apr Jun » Archives June 2012 May 2012 April 2012 March 2012 February 2012 January 2012 December 2011 November 2011 October 2011 September 2011 August 2011 July 2011 June 20117 of 8 6/26/2012 10:59 AM
  8. 8. Short Sales Will Increase Dramatically in 2012 May 2011 April 2011 March 2011 February 2011 January 2011 December 2010 November 2010 October 2010 September 2010 August 2010 July 2010 June 2010 May 2010 April 2010 March 2010 February 2010 January 2010 December 2009 November 2009 October 2009 September 2009 The KCM Crew on +292 Like Pati Maez, John Coats and 12,673 others like this. Copyright © 2012 Keeping Current Matters, All rights reserved8 of 8 6/26/2012 10:59 AM