According to an article by Businessweek last week, “there has been a ‘dramatic shift’ in banks’ willingness to sell a property for less than the mortgage balance”. The Businessweek article also cites data from RealtyTrac Inc, which shows that short sales are generally a 20% discount compared to homes that are traditional sales, while bank-owned homes (after foreclosure) are a 40% discount. In short, that means that the lender is making back even less of their investment on a foreclosure, and they’ve realized that a short sale is the smarter way of doing business.
The article quotes Ron Peltier, chairman and CEO of the second largest residential brokerage in the United States, HomeServices of America Inc. Peltier says, “Banks have become much more supportive of short sales. That’s better for the lenders, who have smaller losses on short sale, and it’s going to be better for homeowners, who won’t have as much psychological distress as a foreclosure.”
These lenders don’t WANT to own your homes, folks. They are practically falling over themselves to grant a short sale. So much so, that many of these lenders are offering cash to the sellers at closing in amounts of $5k, $10k and even $30k! That doesn’t sound like a bad deal to me!
The article continues: “Banks are not only approving more short sales, they’re doing it in less time,” although it does go on to point out that the time frame for a short sale is still much longer than that of a traditional sale. This is because of how many people have to touch the file in order for a short sale to be approved: mortgage servicers, mortgage investors, homeowners, real estate agents/brokers, mortgage insurance companies, etc. But it’s still important to note that the banks are working to streamline the process.
The U.S. Government is certainly on board; they’ve worked with lenders to roll out the HAFA program to encourage sellers to short sale. This is because short sales are good for the economy at this point. When homeowners come out from under that upside-down debt, they may be more willing to spend money, which helps the economy. Additionally, as the Businessweek article points out, “Because short sales typically are occupied soon after the deal, neighboring properties take less of a hit in values,” which means that short sales are actually helping the real estate market improve, in comparison to foreclosure sales.
Read the entire Businessweek article here.