Based on the recent RealtyTrac year end report, it appears short sales are up and bank owned real estate sales are down. Statewide, short sales were up 3 percent in the fourth quarter of 2011 compared with the same time in 2010, while bank-owned sales were down 32 percent. REO down 32%!
One big explanation for the heavy slow down in foreclosures is the robo-signing hangover from 2010. The system is currently overloaded with homes in some stage of foreclosure but just stalled out in the process. Estimates of homes late on payments, homes in a stage of foreclosure, and homes already owned by the banks but not released for sale run in the 4-6 million range. That’s 4-6 million homes! Think garden hose with a basketball stuck in it.
Another explanation is that banks don’t want the homes. Banks want short sales not foreclosures. Foreclosures sell for an average of 24% less than what a short sale will sell for. The banks have finally started realizing and agreeing that short sales are part of their business. They helped people get into the homes and now they have to help people get out of the homes. Welcome to real estate after a bubble.
A large portion of my business is short sales, and at any given time we have a large number of pending sales just waiting for bank approval. I can’t say I’ve seen any overall speed up in the process, but I can say the banks have started putting processes in place. The big slow down appears to be all the governmental red tape with all the different gov programs that almost no home owner qualifies. However, the banks seem to be required to at least attempt qualifying each short selling home owner. Frustrating, but part of the business.
2012 is the year of the short sale…and maybe the first of two or three years of short sales. Main points as to why this is the year:
- Banks net more cash in a short sale vs a foreclosure
- Banks aren’t in the property management business, and don’t want to be
- Debt foregiveness act of 2007 expires at the end of 2012. This is the ability to null and void the taxes from a 1099 you receive after being relieved of debt on your primary residence.
- Banks are offering cash incentives to some home owners if they agree to short sale. This is a big sign the banks are serious about short sales.
- Foreclosures take an average of 600+ days in Florida and in that time period a property declines in condition.