Believe it or not it’s been over ten years since the financial crises and Great Recession, and the short sale is still relevant! And this is why…
Coming on the heels of a dismal January, the National Association of Realtors March 22nd data release announced good news declaring a home sales “surge” during February (nar.realtor). February’s closings increased 11.8 percent, compared to January! But the bad news is that the number of sales also decreased 1.8 percent from last year. If you follow real estate news, you know that homes sales stats were disappointing during the winter. (Consider that 2018’s total existing home sales were lower than the previous year’s total, according to NAR’s statistics). February’s adjusted annual home sale rate of 5.51 million is lower than the same time last year, and pales in comparison to the 6.48 million home sales in 2006.
Although February was indeed a busy month, NAR’s March 28th data release of the Pending Home Sale Index predicts a slow start to the spring market. Homes that went under contract during February decreased 1 percent from the previous month and decreased 4.9 percent from the previous year. This “forward looking index” indicates that next month’s home sales may disappoint.
But there is a silver lining. Home sale prices continue to rise, meaning that home owner equity is not eroding. February’s median existing home sale price increased 3.6 percent from the same time last year. And according to NAR’s statistics, home sale prices have risen for 84 consecutive months (which equates to 7 years of continued gains)!
There are many reasons for a short sale
Although home sale prices are rising, there are still many home owners who are underwater. According to Attom Data (attomdata.com), distressed home sales still account for 12.4 percent of all home sales. Of course, this is far from the 38.6 percent in 2011. And the percentage of distressed sale continues to decrease. However, the number is still significant.
It’s estimated there are millions of underwater home owners. There are a number of reasons why home owners may be underwater, including (but not limited to) years of deferred maintenance, or a negative equity mortgage. Many short sales today include investment properties. Some home owners don’t know they are underwater until they list the home for sale.
Although not as prevalent as in 2011, the short sale is still relevant! Many underwater home owners don’t have to sell, as they are not financially distressed, and are happy to stay put for many years. However, some are compelled to sell for a number of reasons (such as divorce, bankruptcy, etc.). Some underwater home owners may have a desire to move, but can’t because they are underwater (such as empty nesters and retirees).
If you think your home sale may result in a short sale, get the facts. Question what you hear from others and what you find on the internet. There is a lot of information circulating about short sales. A majority of the information is either misleading, erroneous, and/or outdated. Consult with an attorney who negotiates sales to help you understand the legal aspects. Also consult your accountant for the financial implications.
There is much to consider, and a lot at stake! Be careful when considering your listing agent. Due your due diligence and hire an experienced short sales agent that knows the process and is savvy about appealing lender values. Many listing agents will give up on a short sale, mostly because it’s hard work. So most important, make sure your agent has a track record of getting the short sale to settlement.
Original published at https://dankrell.com/blog/2019/04/18/short-sale-is-still-relevant
By Dan Krell
Copyright © 2019.
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.