Short Sales Could be the Solution to Housing Market Only if..

Campbell Communications surveyed 1,000 real estate agents and found 19 % of all home sales during January and February of 2009 were Short Sales. On average there is one Short Sale for every two foreclosed property sales.

Short Sales are more cost effective than a foreclosure because they avoid the legal expense of a foreclosure, maintenance expenses, and interest and real estate tax expenses. In addition, Short sales can be completed  with less marketing time and exposure to price fluctuations in the market.

Short sales also are better for the seller. The seller will not have a foreclosure on their record and often are fore given of the debt after the sale.

If Short Sales are so good why are we not doing more of  them.

According to Campbell Communications, for every completed short sale, three fail due to slow responses to the offers.

It is not uncommon for short sales to take a minimum of 5 months to get a response or acceptance from the bank.

Why does it take so long to get a response. For one thing, the Banks are usually not the decision makers in a Short Sale. Banks typically are only servicing the loan and need approval from the investor.

If Short Sales are better than a Foreclosure then here is my solution to the problem.

Take banks out of the equation and stop rewarding them with money incentives.

If banks are not the decision makers in Short Sales then why reward them with cash.

I suggest we set up another review process for Short Sales.

buyers, seller, lender, and investor, and the Fed need to be part of the process.

Why the Fed?

The number one problem with Short Sales is Investors do not want to take a loss on their investment.

(The loss is the difference between what is owed on the mortgage and the price being offered in a Short Sale.)

In order to get more Short Sale approvals the Fed could guarantee the loss to the investor.

When the Short Sale is finally approved by all parties then they must perform or be in default.

If buyers default then they could be loose their earnest money. If sellers or lenders default then buyers could sue for specific performance.

Finally, Short Sales could become the Solution to the Housing market only if we take necessary steps to change how it is currently operating and streamline the process.

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