Real Estate Forecast – More Short Sales

More than one third of all home sales in the U.S. are distressed sales, according to the National Association of Realtors, with expectations of even more to come.

Some real estate forecasts are predicting more short sales, where the bank agrees to sell the home for less than the mortgage, as a way expedite a large inventory of distressed properties.

In excess of 20% of homeowners owe more on their mortgage than the value of their home, which creates a higher risk of default, and short sales present a way out for some borrowers.

In order for short sales to really impact the market, they need to be faster and more efficient to expedite the backlog of delinquent loans. Recent changes are pointing to a new direction for short sales, which have been known to be very slow with a high fall out rate. Lenders and regulators are getting aggressive about streamlining the process.

A number of large banks are adopting automated software platforms in order to make the short sale process faster. A leading provider of these automated platforms announced that their system is currently automating over 125,000 active short sales, and real estate brokers have been reporting easier closing transactions.

Fannie Mae is also trying to reduce approval times on short sale transactions using a streamlined information collection platform. Fannie Mae processes data to improve valuations and make faster decisions. It was common for short sale requests to take months, now a response can be issued within days of reviewing the case.

Another report says that the FDIC has told the largest mortgage servicers to consider paying delinquent borrowers thousands of dollars to leave their home. The \”Cash for Keys\” program encourages banks to offer cash incentives to avoid a potentially long foreclosure process.

Legislation was recently introduced in Congress that would require faster short sale approvals. The bill would impose a 45 day maximum deadline for lenders to respond to short sale requests.

Making short sales more efficient can accelerate the pace of distressed home sales and reduce the inventory of foreclosures on the market. faster, more efficient short sales can benefit banks and borrowers, however, home sellers may feel the pressure on home prices.

Written by Rick Smith: mortgage and refinance rates

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