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10 Nov 08 Short Sales Transactions Stimulate Real Estate Sales

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As home foreclosures rates continue to climb in Florida and throughout the country, buyers increasingly look to non-traditional purchase methods. One of those that continue to draw interest is the “short sale” — an agreement by a lender to accept less than it is owed when a property is sold. Distressed homeowners seem to get a loan modification, sell the home in a short sale or let it go in foreclosure.

From the standpoint of the seller, the consumer convinces the lender to forgive a portion of the mortgage balance; the borrower avoids foreclosure — a more costly event for the bank, which with a short sale is able to minimize its losses. The buyer, in turn, purchases a home for substantial discount — 10 to 30 % off the previous sales price, though the property may be in need of repair. Nearly 2of every 5 homes sold today are the result of distressed situations, either with a short sale or foreclosure, according to the National Association of Realtors.

The short sale practice has been around for years but has increased significantly in recent months, especially as nearly 1 in 5 American home loan borrowers owe lenders more than their homes are worth, according to a recent report by First American CoreLogic. The housing report concludes that roughly 7.63 million homes had negative equity in September 2008 and more are headed that way if home prices fall another 5 %. Florida is among the seven hardest-hit states (including Arizona, California, Georgia, Michigan, Nevada and Ohio), accounting for nearly 2 of every 3 homeowners who owe more than the value of their house while accounting for only 2 of every 5 mortgage loans.

Further, U.S. home prices fell a record 16.6 % in August from a year earlier, with declines in all 20 major metropolitan areas measured by the S&P/Case-Shiller Home Price Indices. For home buyers interested in the short sales market, there are deals to be had, but only if the consumer expends the effort to understand the process. For example, the buyer should understand the property in question. Is the seller behind in payments and in default? These situations make for a short sale candidate and should be known before starting negotiations. > Read Complete Short Sale Article



Reader's Comments

  1. |

    I found your short sale blog on MSN Search. Nice writing. I will check back to read more as this foreclosure crisis unfolds. Short sales and loan modifications are definately two great solutions to stop foreclosure. – Erica Hundley



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