I recently ran numbers (using MLS) to determine the impact of short sales on the Greater Boston market in 2011. They appear to impact just over 5 percent of the market, depending upon the neighborhood or municipality. It appears that the more affluent the community, the lower the percentage of short sales. In some neighborhoods that I spot-checked up to 13 percent of sales were short sales. The numbers are consistent with 2010.
I was also looking for a statistic that would tell what percentage of short sale listings actually closed. Depending upon the community, I found that 30 to 50 percent of short sale listings did not close. (I didn’t extract the number of repeat listings because that required examining each listing manually. Therefore, my numbers are off somewhat because some short sales are listed more than once to allow enough time to go through the process or get the asking price to where buyers will make offers on them.)
For those that need a review, a “short sale” is the sale of a property by a seller that can’t sell the property for enough money to pay off all of the mortgage balance(s) on the property in full. Sometimes the seller can’t afford to make payments any longer. Sometimes the seller needs to move and can’t afford to pay the lender(s) the difference between the sale price and the mortgage balance(s).
If you are not sure about the details of a short sale, see my October 2009 post:
Since the last time I wrote about short sales, many lenders have increased staff to handle them more efficiently but that doesn’t mean that getting a short sale offer accepted and closed is faster or easier. The process still has more steps than the average transaction.
The seller’s lender ultimately has the final say. When the seller has a first and a second mortgage or home equity line, two lenders are involved. That often means that both lenders must negotiate until they can agree on how to divide up the loss. That also assumes that the seller has no other resources that the lenders will require the seller to liquidate to contribute to the shortfall. These things take time to work out and lenders are flooded with requests for short sales.
Several attorneys have told me that sometimes lenders simply can’t figure out who owns the mortgage(s), which makes it impossible to get some short sales approved. If the seller’s mortgage was bundled and sold together with many other mortgages, that makes it difficult and sometimes impossible (I am told) to locate the mortgage in question and ask its current owner to modify the terms. Without modifying the mortgage’s terms, the only way that the seller can get out of the house is to pay off the loan or let the lender(s) foreclose.
Do you have a positive or negative short sale experience to share?
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