Examining short sale myths In Utah !
Examining Short Sale Myths :
President’s Message :
Chris Sloan
Some of the hottest topics in real estate today deal with the buying and selling of short sales and foreclosures. From clients, neighbors and the media, I am constantly answering questions about the number of distressed properties on the market and how to get the best deal on them.
During these conversations, I’ve realized there is a lot of misinformation about this topic. Some consumers believe it is impossible to buy a short sale while others think nearly every home on the block is in foreclosure. Today I’ll dispel some of these myths and present information about what you can really expect in Utah’s current real estate market.
Let’s start with some definitions. A short sale occurs when a property owner needs to sell their house but owes more than the property is worth. This situation most often happens when the home’s value has fallen and the owner has no equity in the property. Instead of going through a lengthy and costly foreclosure process, banks will allow the homeowner to sell the home for less than the mortgage amount. Not only can the lender save money, but the homeowner receives a less severe mark on his or her credit report.
A foreclosure is defined in a variety of ways. It can be a foreclosure filling, where it is publicly recorded that the homeowner is in default or that the home will be sold at an auction. It may be an actual foreclosure where the lender has gone through the process and now owns the property and is selling it through a real estate broker or at an auction.
With those definitions in mind, let’s look at some of the common myths:
Myth 1: The market is saturated with foreclosures.
While Utah’s foreclosure rate has been on the rise, it still remains lower than the national rate. In fact, in the latest statistics from the Mortgage Bankers Association, Utah had the 17th lowest foreclosure rate at 1.79 percent, well below that national rate of 3.30 percent. That means only about 7,900 of the 440,841 loans in Utah were in the foreclosure process at the end of the fourth quarter — certainly not the majority of homes. The foreclosure rate is often confused with the delinquency rate, which tracks mortgages at least 30 days past due. At 6.06 percent, Utah’s was the 13th lowest in the U.S., with the national rate at 7.88 percent. Although the delinquency rate signals homes headed toward foreclosure, keep in mind that not all the homes will go through the foreclosure process. Homeowners may be able to negotiate a payment plan with their lender or sale the property through a short sale.
Myth 2: The majority of properties for sale are short sales.
A recent article said between 50 and 75 percent of homes on the market today are short sales — a figure that is simply too high. Statistics from the Wasatch Front Regional Multiple Listing Service, which tracks the majority of homes listed and sold in Utah, show only 16 percent of all homes for sale in the four Wasatch Front counties and Tooele are short sales. That means if you are looking to buy a short sale, there are definitely opportunities. Consumers should know, however, that short sales are not the only option in today’s market. The majority of homes for sale are by traditional sellers.
Myth 3: Short sales never make it to the closing table.
From December 2008 through February 2009, 429 short sales were sold in the four Wasatch Front counties and Tooele, according to WFRMLS statistics. A recent article said only about 10 percent of short sale attempts actually make it to closing; however, the reality is that there are a number of buyers competing for short sales and only one will be able to purchase the property. A statistic from the California Association of Realtors suggested the short sale success rate was closer to 50 percent.
Myth 4: Short sales can be bought for bargain basement prices.
Although short sales can be great deals, a bank won’t approve an offer that is significantly below market value. Lenders are trying to minimize their losses, and although they will sell competitively priced real estate, they require purchase prices to be in line with current market values. Your Realtor will be a great resource in helping you determine what price a bank will likely accept — a step that will save time for both you and the bank. For more information about short sales, contact your local Realtor or find one at UtahRealtors.com. There are many Realtors who specialize in short sales who would be happy to help you navigate the ins and outs of these complicated transactions.