SHORT SALE - WORTH THE WAIT??

A Short Sale Worth the Long Wait

By Aol Real Estate Staff(RSS)

May 10th 2011 11:01PM

The term "short sale" is enough to make many homebuyers bolt out the door in a panic. But when Jennifer Craft and her husband discovered that the house of their dreams was listed with the often-misunderstood sales tag, they didn't balk.

With a little luck and a lot of perseverance, the Crafts successfully navigated the short sale process and came out the other end with a fabulous new home.

In 2003, Jennifer and her husband purchased a starter home in Knoxville, Tenn. At the time, it was the perfect size for a new family.

But after a few years in the house, the couple was ready for something larger with a bit more character. So on the advice of a friend, they spoke to a Realtor about a spacious listing in a great neighborhood.

"From the quality of the granite countertops to the hardwood flooring, it was exactly what we were looking for," Jennifer says. And for the price, the couple would gain about 1,000 square feet for nearly $40,000 less than similar homes in the area. There was just one catch: The house was listed as a short sale.

A short sale is a home purchase in which the price falls short of what the original owner owes on the mortgage. The lender who issued the mortgage agrees to cut its losses and accept the proceeds from the sale, while the seller avoids the risk of foreclosure and, in some cases, has the outstanding debt forgiven. In an ideal scenario, the lender avoids a lengthy foreclosure process, the seller suffers less damage to his or her credit, and the buyer gets a home at a steep discount.

(Learn more about short sales here.)

The problem with short sales, though, is the uncertainty of the process. It could take several months before the offer goes through, and even after months of waiting, the home could still potentially be foreclosed on, or the owner could come to terms on a mortgage modification. And for repeat homebuyers like the Crafts, there's also an added risk in timing the transaction.

"We actually sold our first home in just 48 hours," says Jennifer. "We were amazed." With only a month until the new owners moved in, Jennifer and her family would have to move out regardless of whether their short sale offer was accepted.

Unwilling to rent for an indefinite amount of time, the family decided to move in with Jennifer's parents.

"You really have to be prepared to wait for an uncertain amount of time, which can be a strain on the family," she says about the temporary arrangement.

Jennifer lived with her husband and toddler son in her parents' house for four long months before getting confirmation that their offer was accepted.

When all was said and done, the Crafts purchased the four-bedroom, 2.5-bath home for $225,000 -- almost $40,000 less than what other homes in the neighborhood sold for.

And while Jennifer is the first to admit that the process is not for everyone, she says she's glad they went through with it.

"Because we were able to wait, now we have a great house in a great neighborhood," she says. "It was really worth all the struggle. We couldn't be happier."

To hear the whole story, watch the video above

VIDEO: IS A SHORT SALE WORTH THE WAIT?

A Short Sale Worth the Long Wait

By Aol Real Estate Staff(RSS)

May 10th 2011 11:01PM

The term "short sale" is enough to make many homebuyers bolt out the door in a panic. But when Jennifer Craft and her husband discovered that the house of their dreams was listed with the often-misunderstood sales tag, they didn't balk.

With a little luck and a lot of perseverance, the Crafts successfully navigated the short sale process and came out the other end with a fabulous new home.

In 2003, Jennifer and her husband purchased a starter home in Knoxville, Tenn. At the time, it was the perfect size for a new family.

But after a few years in the house, the couple was ready for something larger with a bit more character. So on the advice of a friend, they spoke to a Realtor about a spacious listing in a great neighborhood.

"From the quality of the granite countertops to the hardwood flooring, it was exactly what we were looking for," Jennifer says. And for the price, the couple would gain about 1,000 square feet for nearly $40,000 less than similar homes in the area. There was just one catch: The house was listed as a short sale.

A short sale is a home purchase in which the price falls short of what the original owner owes on the mortgage. The lender who issued the mortgage agrees to cut its losses and accept the proceeds from the sale, while the seller avoids the risk of foreclosure and, in some cases, has the outstanding debt forgiven. In an ideal scenario, the lender avoids a lengthy foreclosure process, the seller suffers less damage to his or her credit, and the buyer gets a home at a steep discount.

(Learn more about short sales here.)

The problem with short sales, though, is the uncertainty of the process. It could take several months before the offer goes through, and even after months of waiting, the home could still potentially be foreclosed on, or the owner could come to terms on a mortgage modification. And for repeat homebuyers like the Crafts, there's also an added risk in timing the transaction.

"We actually sold our first home in just 48 hours," says Jennifer. "We were amazed." With only a month until the new owners moved in, Jennifer and her family would have to move out regardless of whether their short sale offer was accepted.

Unwilling to rent for an indefinite amount of time, the family decided to move in with Jennifer's parents.

"You really have to be prepared to wait for an uncertain amount of time, which can be a strain on the family," she says about the temporary arrangement.

Jennifer lived with her husband and toddler son in her parents' house for four long months before getting confirmation that their offer was accepted.

When all was said and done, the Crafts purchased the four-bedroom, 2.5-bath home for $225,000 -- almost $40,000 less than what other homes in the neighborhood sold for.

And while Jennifer is the first to admit that the process is not for everyone, she says she's glad they went through with it.

"Because we were able to wait, now we have a great house in a great neighborhood," she says. "It was really worth all the struggle. We couldn't be happier."

To hear the whole story, watch the video above

FORECLOSURES ARE DOWN

Foreclosure activity has fallen to a 40-month low, but not because of any recovery in the housing market, a new report finds. Rather, the slowdown comes from massive delays in processing foreclosure paperwork.

In April, overall foreclosure filings - including default notices, scheduled auctions and bank repossessions - declined for the seventh month straight to 219,258, a 9 percent decrease from March and a 34 percent decrease from April of last year. Banks seized 69,532 homes last month, a 5 percent drop from March, according to data provider RealtyTrac.
"This slowdown continues to be largely the result of massive delays in processing foreclosures, rather than the result of a housing recovery that is lifting people out of foreclosure," said James J. Saccacio, chief executive officer of RealtyTrac, in a press release.

Nationwide, foreclosures completed in the first quarter of the year took an average of 400 days from initial default notice to conclusion, up from the 340 days the process took last year and more than twice the average time - 151 days - it took to complete a foreclosure in the first quarter of 2007. In some states, that number soared higher. In New Jersey and New York, the average time frame in the first quarter of this year was 900 days. In Florida, it was 619.

With home prices still falling, a slowdown in foreclosures driven by paperwork delays is bad news for the overall housing market recovery. Home prices hit their lowest point in two years in April, falling 0.7 percent below March 2009 levels, according to a recent report by Clear Capital. Housing experts say that the data from RealtyTrac's report does not indicate that a reversal of this trend will be quickly forthcoming

MORE PEOPLE ARE BUYING

Existing home sales continued on an upward though unsteady path in the first quarter of this year, thanks in large part to sales of foreclosures and other discount properties.

Home sales rose in 49 states and Washington, D.C., according to a report released Tuesday by the National Association of Realtors. Total existing home sales increased by 8.3 percent to 5.14 million, up from 4.75 million in the last quarter of 2010. The only state not to not see growth in the quarter was Vermont.

The uptick can be largely attributed to more investor and repeat-buyer purchases. Investors made up 21 percent of sales, up from 18 percent a year ago, while repeat buyers were 47 percent of the market, up from 40 percent.
The growing prominence of these cash-ready homebuyers reflects tight credit conditions that continue to keep first-time buyers priced out of the market. First-time buyers accounted for only 32 percent of the homes purchased in the recent quarter, down from 42 percent last year, when the homebuyer tax credit (of up to $8,000) was still in effect.

A trend continuing in this year's first quarter is the popularity of distressed properties, which typically are 20 percent cheaper than homes not in foreclosure, according to NAR figures. Those homes accounted for 39 percent of sales this quarter, up from 36 percent a year ago.

Lower priced homes saw the biggest sales increase this quarter, in part because of all-cash buyers. The median existing home sales price fell to $158,700 -- down 4.6 percent from $166,400 this time last year.

But as the overhang of distressed properties shrinks, home sale prices will eventually start to rise, according to NAR chief economist Lawrence Yun.

"The rising sales trend in nearly all states is a part of the healing process to clear off inventory," he said in a press release. "Sales need to rise before prices can firm up."

First-time buyers should take note, however, that foreclosures are not the only bargain properties. With such a huge inventory of homes available, first-timers should compare prices on all the properties in their area before undertaking the often complicated process of buying a foreclosure.