Dan Greer – Realtor

Currently 63% of all MLS listed homes in Fresno and Clovis are considered distressed properties.  The term distressed are properties that are either in pre-foreclosure (short sales), meaning they have defaulted on their mortgage and the lender has filed a notice-of-default (NOD), or the lender has already completed the foreclosure and the property is now considers real estate owned (REO) meaning the lender now owns the property.

Pre-foreclosure properties are listed on the Fresno MLS as short sales. A few years ago the number of short sales in Fresno and Clovis were near zero, and REO properties dominated the market, but as home owners continued to default on their mortgages, the option of short selling became much more practical.  Homeowners that choose to short sell their home, are finding that it’s more strategic to exit their homeownership with a short sale verses foreclosure, largely because of the lesser negative impact on their credit allowing them to return to the housing market sooner.

Lenders were originally slow and even unwilling to allow a homeowner to shot sell their home, but as the housing market continued to struggle, they have begun to see the cost savings in allow homeowners  to sell short verses foreclosing. Yes, the lenders are still on the losing side of the transaction, but the typical homeowner short selling their home, leaves the home in much better condition than a foreclosed home, and with the short sale transaction, the home is seldom left vacant, creating less distress and keeping sale price higher.  

Below I have a data table showing the percentages for MLS listings in the month January 2012. If you scan across the data on the table you’ll see that 53% of the active listings are traditional home sales, meaning they are still current with their mortgage payments and have not defaulted. Again as you scan across you’ll see that 37% of the properties sold were traditional sales, showing that there are still homeowners selling that are not underwater. When you drop down to the short sale line, you’ll see that 29% are listed as short sales and 54% are pending, but only 21% are actually closed or sold as short sales. This is improving, but there are still large percentages that fail to get approval from the lender and eventually fall to foreclosure.      

A good argument to convince lenders to approve a short sale is the sale price. I have also included a bar graph showing traditional, REO and short sales median and average prices. As you scan across the graph you’ll see that short sales are nearly the same as traditional sales in both median and average price, whereas REO’s are below in both.  When negotiating a short sale with a lender this could be a point of leverage in getting an approval.

Even with this information about short sale verses foreclosure, I’m still finding homeowners that are underwater and in default on their homes mortgage, but choose not to short sell and allow the lender to foreclose.  Lender are preferring the short sale attempt before proceeding with their option to foreclosure, but homeowners are still choosing to live in the home until evicted. This is at a huge cost on their future credit rating, that could be thousands of dollars yearly in higher interests on credit and even being denied employment if they require certain security clearances. The option to short sale is in my opinion the best of a worst situation. It reduces short and long term credit loss and has a lesser blemish on credit reports, and in some situation has allowed these former homeowners to return to homeownership in as little as two-years verses 7 to 10 with a foreclosure.

If you or anyone you know needs assistance with a short sale, please have them contact me.  I would love to help!