Let's start of by noting the foreclosures are not going anywhere.  There are plenty of them and they will keep on coming.  There is a large supply (the size of which is greatly disputed) of lender owned properties that are not on the market, that at some point will.

Foreclosures are not disappearing completely, but they are slowly taking a smaller role. 

That role is increasingly being filled by short sales.  Get ready for at least 2 years of a major role for short sales and a playing role for some 5-7 years. 

Let's take a look at the charts.

A look at the active properties reveals an increasing role of the short sale.  At time of writing there were 14,648 active residential properties.  This is up from 12,569 in August.  In fact about 40% of active properties are now short sales and buyers do have to contend with them.  It's difficult not.

Active listing are important but the more important numbers are the actual sales of short sale properties.  Not surprisingly these are up as well.   There are 3,877 pending properties up about 20% over last quarter. 

The chart is also very clear about the trend.  I don't show it here, but the chart with AWC-I are under contract with a contingency is heavily skewed with a very quick and large rise in such properties. 

The pendings are more telling as most are approved at that point.  In the AWC mode they are awaiting approval from the lender and then they go pending once it's approved: that's in most cases, but not all.

Finally sales.  Just over the last 6 months actual short sales that have closed have increased from 10% of the market share to 20% and that trend will continue. 

Of the short sales that go off the market last months numbers are encouraging because the success rate was 48.3% vs about 12% last year.  That means that out of all the properties that went off the market 48% actually sold vs. being expired or canceled.

It's a signal of things to come and a result of the improving, though still difficult, short sale process.

Why is this happening?  These change have come about for several reasons.

1. Lenders see the value in doing short sales.

2. Short sales are less destructive on the property then foreclosures which when done are at much more risk of being vandalized and un-kept, not necessarily buy the owner as much as a consequence of being an unoccupied target.

3. Short sales must give more money to the banks or they would not do them, because that's what it's really about - the money.

4. The government agencies are pushing short sales.  The worst thing is putting people out of a home or doing it abruptly and negatively.

5. Fannie Mae and Freddie Mac want short sales or modifications vs. foreclosures and they have over 70% of the loans out there and the others usually follow suite.

6. There is some legislation ahead that will help, apparently, with the process.

7. There is more acceptance of short sale.  More buyers are willing to take on the process of purchasing a short sale them before.  This is because the banks and the Realtors are now better at it.

8. The process come into it's own, matured to something that actually works.  Though still probably a teenager the process has matured away from the very prolonged terrible twos. 

We went over some of the benefits for doing a short sale for owners, lenders, investors.  It is of greater benefits to all parties vs. letting the foreclosure process take place.

These changes affect both buyers and seller and both need to be more aware and educated about the process.

As a buyer there is no reason to fear or discard short sales as long as you are a-tune to and fully aware of the process of buying a short sale and you have competent representation to protect your interests and to make sure that the transaction is put together well and managed well.  There are many details to be aware of in the process and the contract. 

It's not enough to simply fill in the blanks. 

We are experienced short sale Realtors on both sides: selling and buying.  Joanna 602.358.1392

(all graphs are via the Cromford Report)