Short Sale Process

TL;DR

Short sales are becoming a key real estate opportunity.

Transcript

hi there folks this is Tracy reyce for Bigger Pockets and this week's Vlog is going to cover a little bit about short sales and why they might be the next sort of inventory to chase as Aro and other types of distress properties are harder to get your hands on so let's go back to the basics what is a short sale now I'm sure you probably know what it... Read More

Key Insights

• Short sales occur when a homeowner owes more on their property than its current market value, allowing buyers to settle the debt for less.
• Despite being complex, short sales are gaining attention due to the decreasing availability of other distressed properties like REOs.
• In 2012, short sales increased by 22% in the third quarter, accounting for 65% of pre-foreclosure sales, highlighting their growing significance.
• Lenders provided approximately $13 million in debt relief through short sales between March and September 2012, indicating financial viability.
• Foreclosure sales outnumbered bank-owned home sales in 2012, with 98,000 homes sold compared to 95,000 bank-owned homes, showing a shift in market dynamics.
• In Arizona, distressed properties constitute about 40% of sales, with short sales representing 70% of these transactions, highlighting regional trends.
• Short sales have become more streamlined, with processes completed in 3-5 months, making them a viable option for buyers.
• With only three months of inventory in Phoenix, short sales present a promising opportunity for real estate investors facing limited options.

Questions & Answers

Q: What is a short sale?

A short sale is a real estate transaction where a homeowner sells their property for less than the amount owed on their mortgage. This process allows the buyer to settle the debt with the lender at a reduced price, often below market value, to avoid foreclosure.

Q: Why are short sales becoming more popular?

Short sales are gaining popularity due to the decreasing availability of other distressed properties like REOs. As real estate markets recover, traditional foreclosure opportunities diminish, making short sales an attractive option for investors looking to acquire properties at a discount.

Q: What are some recent statistics on short sales?

In the third quarter of 2012, short sales increased by 22% and accounted for 65% of pre-foreclosure sales. Lenders provided approximately $13 million in debt relief through short sales between March and September 2012, highlighting the growing significance of this transaction type.

Q: How do short sales compare to bank-owned home sales?

In 2012, foreclosure sales, including short sales, outnumbered bank-owned home sales, with 98,000 homes sold compared to 95,000 bank-owned homes. This indicates a shift in market dynamics, with more transactions occurring before properties revert to bank ownership.

Q: What is the situation with distressed properties in Arizona?

In Arizona, distressed properties account for about 40% of sales, with short sales representing 70% of these transactions. This trend highlights the regional significance of short sales and their role in the current real estate market landscape.

Q: How has the short sale process improved?

The short sale process has become more streamlined, with transactions now completed in 3-5 months, and sometimes even less. This improvement makes short sales a more viable and attractive option for buyers compared to the lengthy processes of the past.

Q: What is the inventory situation in Phoenix?

Phoenix currently has only three months of real estate inventory, indicating a limited availability of properties. This scarcity makes short sales a promising opportunity for investors seeking to acquire properties in a competitive market with few options.

Q: Why should investors consider short sales?

Investors should consider short sales due to their increasing prevalence and the streamlined process, which allows for quicker transactions. With limited inventory in many markets, short sales offer a viable alternative for acquiring properties at reduced prices, potentially leading to profitable investments.

Summary & Key Takeaways

• Short sales are becoming a key focus for real estate investors as other distressed properties, like REOs, are harder to find. The process involves settling a homeowner's debt for less than the property's market value, providing opportunities for buyers.

• In 2012, short sales accounted for a significant portion of pre-foreclosure sales, with lenders offering substantial debt relief. This trend is evident in Arizona, where distressed properties make up a large part of the market.

• The short sale process has improved, with transactions now completed in a few months. With limited inventory in areas like Phoenix, short sales offer a promising opportunity for investors seeking new avenues.