This week, we have been introducing what we believe will be five mid-to-long-term opportunities in real estate over the next few years. Today is #5 – The NEW Short Sale Opportunity – The KCM Crew
Talking about short sales as a ‘new’ opportunity seems strange. However, we believe that today’s short sale process is so different than the process you have experienced over the last few years that it does qualify as a completely different opportunity. Let’s explain why.
The housing crisis created a free fall in prices over the last five years. This collapse in housing values has created a situation where millions of homes today are actually worth less than the mortgage currently on the house (a situation known as being ‘underwater’). CoreLogic in their most recent Negative Equity Report explains that there are over eleven million houses currently underwater.
Anytime one of these sellers wants or needs to sell, the proceeds they will receive at the closing will not satisfy the mortgage. The seller must either make up the difference in cash or petition the bank to accept the proceeds as payment in full. If the bank agrees to accept a lesser amount it is known as a ‘short sale’.
Why Act Now?
According to CoreLogic ‘s most recent Shadow Inventory Report, there are currently 1.5 million distressed properties that will come to market over the next several years. The number of these properties sold as short sales is up 19.7% over last year’s numbers (foreclosures were up 2.7% and modifications were down over 30%).
The banks are beginning to see a ‘short sale’ as a better alternative to foreclosure for them, the seller and the neighborhood. There is no doubt that banks are leaning toward short sales rather than foreclosure. In a recent news release, the FHFA announced new guidelines to streamline the short sale process.
FHFA Acting Director Edward J. DeMarco on the new guidelines:
“These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities.”
In a DSNews article, both Fannie Mae and Freddie Mac reaffirmed their desire to proceed with short sales rather than foreclosures.
Leslie Peeler, SVP, National Servicing Organization, Fannie Mae:
“Short sales have become an increasingly important tool in preventing foreclosures.”
Tracy Mooney, SVP Single-Family Servicing & REO at Freddie Mac:
“These changes will further empower the industry to minimize foreclosures.”
We believe short sales will skyrocket over the next few years. Take advantage of this business opportunity.
The 5 Things You Must Do to work this demographic.
- Be patient enough to see the transaction to completion
- Keep abreast of new adjustments to the process as there will be many
- Keep current on both negative equity and shadow inventory news
- Make sure you understand the lending process for a short sale transaction
- Consider getting one of the leading Short Sale Designations (CDPE, SFR, CSS)