Do Short Sales Boost Real Estate’s Recovery?

AMA7-24-13 housing market continues to improve – a trend that signals better health for the economy as a whole. Although that means fewer distressed properties are hitting the market, short sales still pop up in the listings — a process with a bad name that can mean a good property.

The number of short sales soared nationwide in the aftermath of the housing collapse of 2008, only to drop again as the housing market began tot get back on its feet and homeowner bailouts helped struggling borrowers with their debt. But home prices are on the rise and some refinancing options are drying up, so some short sale homes are still hitting the market.

A short sale is just that – a home is sold for an amount short of the mortgage owed. It can be an attractive alternative to foreclosure, since although he seller won’t make any money on the deal, the difference between the total mortgage owed and the actual sale among may be forgiven or written off by the lender. But a recent report by MarketWatch points out that the words “short sale” in a listing raise red flags with buyers,

Foreclosures appeal to investors because they’re cheap and usually easy to buy. The short sale process is typically longer, since the seller

must get permission from the lender to put the home up for sale. Short sales also attract scammers who promise to broker deals or do an end run around the lender’s claiming the proceeds.

But short sale properties are generally in better shape than a foreclosure. And since short sale homes remain listed for longer than either foreclosures or standard sales, prices are often steeply discounted and keep dropping the longer the home is listed.

The short sale market is shrinking, though. While foreclosures continue to hit the market with some regularity as old and pending cases work through the system, housing experts say that the overall health of the housing market means fewer homeowners are needing to resort to this option.

Not all short sales are smooth sailing. But investors building wealth in income property as Jason Hartman recommends might well find a good purchase lurking behind an ugly label. (Top image: Flickr/emilystaubert)

Background:

“Short Sale Stigma Helps Home Buyers.” MarketWatch. MarketWatch.com 24 Jul 2013.

The American Monetary Association is the source for the latest monetary and financial information. Read more from our archives:

Do Pocket Listings Manipulate the Market?
What’s Ahead for Fannie Mae and Freddie Mac?

The American Monetary Association Team

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