HomeSection.comHomes By Herman

Are Short Sales Really Selling In Benicia, Vallejo And The Rest Of Solano County?

August 30th, 2009 categories: Buying, Foreclosures / Short Sales, Selling, Solano

Roll of the DiceAs the inventory of homes has decreased in recent months, short sale listings have become an increasingly larger percentage of the available homes for Solano County home buyers.

And that’s caused more and more buyers to ask the obvious question: Are short sale listings really selling?

That’s a question not only on the minds of buyers, but also something prospective short sale sellers want to know, too.

In case you’re unfamiliar with a short sale, in a nutshell, it’s a real estate transaction where the seller is selling a home with a loan (or loans) on it that exceeds the current market value. The seller can’t sell unless his lender agrees to a reduced (or “short”) loan payoff.

By doing a short sale, the lender and the homeowner both avoid foreclosure and the house doesn’t deteriorate to the extent that it might if the seller simply walked away from it. So in theory it’s an opportunity for the seller and the lender to each make the best out of an unfortunate situation.

But if you know anything about short sales, you know that they can take a  L – O  – N – G  time. As in months. Many lenders take 3-6 months to approve a short sale, so there’s a lot of waiting time between the date the the buyer and seller agree on the contract and when the seller’s lender finally approves or rejects the short loan payoff.

So if you don’t have a lot of patience, you could be in for a lot of sleepless nights. Because with a short sale you wait…and you wait…and then you wait some more.

And that brings us back to the question in today’s headline: Are short sales really selling? Or, more specifically, are lenders really approving these sales or are most buyers & sellers waiting months and months only to see the short-sale lender give it the thumbs-down?

That’s always a concern of buyers and sellers alike. For neither really wants to go through such a long period of uncertainty unless there’s a reasonable chance that the sale will really go through.

And in just the past week, I’ve had several clients ask me the very same question: How many short sales listings are actually selling?

So I did a little research in our MLS system and here’s what I found:

  • Over the past 6 months, there have been 2,458 short sale listings.
  • Of that total, about 10% (238) are currently active listings.
  • A little more than 1/4 of them (28%) didn’t sell.
  • Almost half (43%) are currently still in escrow and waiting for the short sale lender to say yea or nay.
  • About 1/5 of them (19%) have already closed escrow.

And what do those numbers tell us? Here’s what I think:

1. Roughly 2/3 of the short sales that have come on the market have either sold or are currently in escrow. And with fewer homes on the market to choose from, buyers are now more than ever willing to take a chance on a short sale.

2. There’s a reason such a large percentage are still in escrow. If you go back four or five months, there was still an abundance of REO listings to satisfy eager buyers. So it wasn’t until the last 2-3 months — when the inventory really started to plummet — that short sale listings suddenly became an attractive alternative for many buyers. And that would explain why almost half of the short sales to come on the market in the past six months are still in escrow awaiting a short sale decision.

3. The first step in the short sale process is for the seller to get an offer from a willing buyer. Only in the past few months have we seen multiple offers on short sales with a lot of regularity. That dovetails with the numbers above and illustrates why such a huge percentage is still in that wait-wait-and-wait-some-more short sale review period.

So the jury still seems to be out on just how many short sales are actually selling. If you’re a seller and look at things purely from a “am I even likely to get an offer since it’s a short sale” standpoint, the answer would seem to be a resounding yes — assuming the house is priced right.

In another two or three months, enough of these currently-pending short sales will have run their course, which will give us a better idea of just how many short sales are really selling.

But at least for now, they seem to be a viable option in the eyes of many buyers. And since only about 1 out of every 4 short sales have actually been turned down by the lender, they still appear to be a viable option for sellers, too.

Further Reading

listings-by-mls-button news-by-email-button search-the-mls-button

This entry was posted on Sunday, August 30th, 2009 at 9:37 am and is filed under Buying, Foreclosures / Short Sales, Selling, Solano. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply