Is It Easier to Short Sale in a Hot Market?
In a not too distant past, learning how to short sale was all the rage. Thousands of homeowners across the nation were reaching out to their Lenders, Attorneys, and local Agents to find out how to get out of an underwater home.
Problem was, there were too many Sellers on the short end of the stick, and not enough Buyers who were willing to take yet another risk. Banks were falling all over themselves trying to delay the foreclosure process, figure out what to do with all these upside down borrowers, and mitigate their own losses. But slowly, hard-hit areas have started to wade through the massive pileup of short sales, pre-foreclosures, and REO’s. The worst hit areas are now boasting double digit year over year appreciation rates, have scores of qualified financed Buyers returning to the market, and less and less of monthly sales being sold as a distressed property. But, does this mean it has gotten easier for those who need to sell a distressed property, or is the problem still all the same?
In markets flooded with foreclosures, the analogy of “a hard night of drinking” is what some economists used to exemplify the rampant over-pricing and exuberance. Following the crash in 2008 was, to follow the same analogy, a very bad hangover.
Although prices have risen, for those that bought at the height of the market, or refinanced during the bubble, the values reached then may never be touched again, or at least not in the foreseeable future. The hangover still lingers in that the mess of foreclosures still has not normalized.
All the glad-handing for skyrocketing prices in 2013 has had little effect on these homeowners, who are still sorely in need of relief from their inequity.
Depending on the price range, Sellers should still find it fairly easy to find a Buyer for their home. Places like Phoenix saw a massive pool of Buyers targeting basically anything and everything below the $150,000 mark, most of which was gobbled up in 2011 to early 2012. If the true value of the home is under $200,000, Phoenicians shouldn’t have a hard time completing an Arizona short sale.
Similarly, there have been inventory shortages in many major metropolitan areas. If the homeowner is working with an experienced short sale specialist who can move the short sale along efficiently, there is still room to compete with traditional sales in the same price range. In fact, many Buyers are still looking for a deal, are anxious to buy while interest rates are still low, and may gravitate towards a short sale to help them land a home while they can instead of competing and constantly getting rejected. If the home is in the first time home buyer range, it is a great market to try to short sale and get it done quickly.
Other types of distress
Distress comes in many forms. Responsible homeowners that have had a loss of income, divorce, are financially responsible now for extended family, or have experienced major medical issues can find themselves in a position they never thought they would be: on the verge of losing their home.
If there is equity in the home, selling quickly on the open market can be the easiest and fastest way to get out from the obligation. However, if the property needs repairs, doesn’t show well, or has other issues, don’t expect top dollar.
If you are in an area that is going up in value, is lacking inventory, and has a lot of qualified Buyers, choose a professional that is sensitive to your needs and will get top price for the home. Anyone with a license can sell a home in a hot market, so be sure to pick one that is really going to do the job well and is a fierce negotiator, will showcase your home with excellent photography, and is worth every dime you’re paying them.
Just between You & Me
Those looking to short sale, sell quickly, or just get out of a home often prefer to make it as simple and painless as possible. It’s not required to use a Realtor to sell your home, although most choose to for the insight and guidance. (In most cases if you short sale the Lender will require you to use an Agent, though).
In some cases there is little equity to pay commissions and get out of the home without owing anything. With that, there are private investors in most cities that will deal with the homeowner directly and keep it as a “private” sale between the two parties. Typically they will want a better deal on terms, prices, or conditions though, as most of the time they are paying cash.
If a homeowner is in a situation where the local market is hot, they still have a lot of negotiating power.
The points where a hot market won’t help the homeowner is if they expect over full value for a home that is in obvious need of repairs, there is no room for an investor Buyer to profit, or the Bank would rather take back the home to foreclosure and sell it themselves.
Otherwise, a strong Sellers market is the best opportunity for unlucky homeowners to try to exercise multiple options to get out of a distressed home.
Author bio: Tracy is an Arizona Short Sale Realtor, Investor, Rehabber, & Foreclosure Expert. She is also an avid blog, vlogger, contributor to Real Estate Magazines, and hosts Real Estate Rescue, a show dedicated to the distressed property market. www.RoyceofRealestate.com
, Real Estate Negotiating
, Tracy Royce
, Being Financially Responsible
, Foreclosure Processes
, Short Sale