What does the future show for Short Sales?

It’s official. Foreclosures have lost their luster at the same time that the banks are going to unload piles of them onto the market.

According to a Trulia and RealtyTrac on-line survey, the number of U.S. consumers who would consider buying a foreclosed property has dropped from 55% in May 2009 to only 45% this year.

This is just as banks are getting ready to dump thousands of properties into the market. In the first quarter, banks repossessed a record of nearly 258,000 properties. Last year’s annual total of 918,000 properties repossessed was a record on its own. At this pace the lenders are going to blow past the last year’s annual number before the World Series final game.

We have already reported on the 4+ million homeowners who are in a seriously delinquent position right now. Of those that actually avoided foreclosure last year using the HAMP program, 10 families lost their home. How many will it be this year?

Now, too many foreclosures will water down the drinks.

Buyer hurdles: Lending restrictions are still tighter than you know what, no more tax credits, and despite a few local buyer grant programs it is tough to find a buyer that out-right qualifies.

Now those that do qualify are losing interest in the properties we are flush with. Why? I gander that the decrease in interest in likely due to non-responsive contract processes, bidding wars, hidden costs, repairs needed that limit available financing, and possible renovation costs. The groups most likely to still buy a foreclosure despite the issues are first time buyers or investors.

The more properties entering the market while consumer interest wanes, means longer days on market or the servicers will have to sell them at investor levels. Buying a foreclosure can mean dramatic savings. Investors will always buy for the lowest percentage, as they should.

Short Sales are Still the Way to Go

For those of us in the short sale business: An REO flush market and low investor purchases will definitely justify discount offers. Buyers who are unhappy with the risks of an REO purchase should be encouraged to buy a short sale. Short sales are often still cared for by the owner-occupant, come with a seller’s disclosure, do not come with long-winded bid processes, all while providing the buyer the most controlled opportunity to buy at true market value.