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John Rebchook reports Short Sales Soar

Short sales are soaring in the Denver area.

All short sales in the metro area rose by 48 percent in the first seven months of 2010, compared with the same period in 2009, according to an analysis of data by InsideRealEstateNews.

The vast majority of the short sales were for single-family, detached homes. A short sale is when a lender accepts less than the mortgage amount

There were 2,270 completed single-family home short sales in the first seven months of this year, almost a 42 percent increase from the 1,610 during the same period last year, according to Metrolist data. And the number of condo short sales skyrocketed a whopping 88 percent, although the actual numbers were much smaller – 476 in January through July this year, compared with 253 in the first seven months of last year. Combined there were a total of 2,746 single-family and condo short sales, accounting for 11.3 percent of the 24,249 closing in the first seven months of this year. In 2009, short sales amounted to 7.8 percent of the 23,803 closing in the first seven months.

Short sales under-reported?

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Many brokers believe that one third or more of the closings are short sales in the Denver area. Short sales are growing in popularity, although often it is a long tedious and frustrating process, for both the buyers and the sellers.

Short Sales: The New Foreclosures
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Challenging situation

“I will tell you it is challenge,” to make sure brokers check the short-sale box, said Melissa Olson, of Metrolist. “We have no way of validating if it is a short sales, unless, of course, we are contacted and it we look into it.” Brokers can anonymously contact Metrolist about any alleged violation, including failing to correctly list a home as a short sale.

Although the Metrolist rules requiring brokers to check the box saying it is a short sales went into effect in June 2008, some brokers may not know about it, despite repeated reminders send to them by Metrolist, Olson said. At least in the past, some brokers even noted the home was a short sale in public marketing materials, but neglected to check the box.

There are potentially penalties for not following the rules, but Olson said Metrolist is much more interested in educating brokers to the correct procedures than punishing them.

According to Metrolist data, the number of single-family short sales peaked in June at 457, and then fell to 271 in July. That is a 40.7 percent drop, even though all closings only dropped 19.5 percent in July from June. Condo short sales also hit a high in June with 96, and then fell by 36.5 percent to 61 in July.

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Failed tax-credit deals factor

Meanwhile, Katherine Jolliffe , a broker with 8Z Real Estate, said that some first-time buyers had placed short sales under contract to get the $8,000 tax credit, but are now unable to close on them by the Sept. 30 deadline, and so they are coming back on the market.

Some first-time home buyers snapped up short sales priced $30,000 or $40,000 under the market, but are now finding that there is little to no chance of them closing by Sept. 30. “There is no closing date when you place a short-sale under contract,” she said.

Jolliffe fully preps any prospective buyer who is interested in a short sale.

“I tell them that that it takes a lot of patience,” she said. “If you are not in a hurry, they can be very good deals.”

But she said there is no point in prospective buyers calling her weekly on the status of the short sale. “You might call the bank and they’ll put you on hold for three hours, and when you get someone at the other end, they hang up on you,” she said. Paperwork is frequently lost and has be be misplaced.

“And banks will only work on one short-sale at a time,” so if a deal falls apart -sometimes after months or even a year of waiting -it’s back to square one, she said. Indeed, she said the prospective buyers have walked away from a lot of homes listed in the MLS as “active short sales.” The broker often is hoping to slip in another buyer at the last minute, but she said more often than not, the bank will shut them down and make them begin the process over.

Deal of the Year

Yet, what she calls her “Deal of the Year,” was a short sale.

A family in Wyoming bought a home at the eastern edge of Fort Lupton for $280,000.

“It’s probably worth $100,000 more than that in a half-way good market,” she said. “It’s a brand new home with a five-car garage on a third of an acre. The family didn’t even know where Fort Lupton was. But after seeing this house, she told me, “I guess we’re moving to Fort Lupton.”

But that deal almost collapsed because the husband’s name was listed as a co-owner in the purchase contract at the 11th hour.

“No one told me they were doing that,” Jolliffe said. “It was a nightmare. It took over two weeks to just to get a response from anyone at the bank,” to approve the relatively minor change. Thankfully, the bank did agree to add his name, but it delayed the sale.

“They were homeless for a week, while we were waited for the approval. But they finally were able to close, and they were so excited. That makes it all worthwhile.”

For stats and the full story please visit Inside Real Estate News by John Rebchook