2. Housing Trends Update May 2010
Separately, the proportion of damaged REO sold during April plunged. Damaged REO
accounted for 15.4% of transactions in March, but only 12.8% in May. One reason for the
drop in damaged REO may be increasing numbers of short sales.
Short sales—where the home is sold for less than the mortgage amount
outstanding and with lender approval—represent a way to resolve homeowners in
default without going through the foreclosure process. Homes often become
damaged during foreclosure due to neglect, vandalism, or theft of appliances and
other fixtures.
“The new Home Affordable Foreclosures Alternative (HAFA) program for short
sales provides additional incentives for underwater homeowners and lenders,”
commented Popik. “This government program only took effect in early April, so we
expect short sales to accelerate in coming months.”
Notably, the average time on market for short sales declined from 17.8 weeks in
May to 16.5 weeks in April, according to the monthly Campbell/Inside Mortgage
Finance survey of Real Estate Market Conditions.
For December and January, short sales had averaged approximately 5 months on
market. Notably, average time on market for damaged REO, move-in ready REO,
and non-distressed properties was nearly level or rising during the February to
March timeframe.
For the first time, the survey received some positive comments from real estate
agents on short sale process reengineering at major mortgage servicers.
“Sales are still slow, especially the short sales—I have seen a great improvement
with Bank of America and the Equator system, but other banks are still a
challenge,” commented an agent in California. An agent in New Hampshire was
less sanguine, commenting,
“The short sales are becoming more prevalent as the lenders are more likely to
work with distressed homeowners who don't qualify for the HAMP program & opt
for the HAFA as an alternative to foreclosure. The Equator system for short sales
still has a lot of glitches in the system that need to be worked out.”
Despite operational difficulties in processing short sales, these distressed
property transactions are important to many agents. Over the past 5 months, short
sales have grown from 12.4% of the market in November to 17.9% in April, despite
a slight downtick in short sales for the most recent month.
Average Listing Side Commission
Listing side commissions on short
sales are the most attractive of any Property Type April 2010
property type, according to the
April survey results. Short sale Damaged REO 2.68%
commissions average 2.78%,
substantially above the average Move-In Ready REO 2.67%
commissions of 2.68% and 2.67%
for damaged REO and move-in
REO, respectively. Non-Distressed 2.74%
Source: Campbell/Inside Mortgage Short Sale 2.78%
Finance Monthly Survey of Real
Estate Market Conditions
All Properties 2.73%
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