Steadfast FinancesThe Short Sale Process Could be Getting Much Faster

The Short Sale Process Could be Getting Much Faster

Filed in Real Estate 3 comments

Looks like round three of government intervention in the housing market is about to kick off. Apparently, the powers that be believe getting struggling home owners who can’t pay their mortgage out of their homes (simultaneously saving their credit report) and selling those properties to well qualified buyers, via the short sale process, will prop up home prices.

Of course, the big picture behind this type of move is pretty simple:

  1. Prevent further deflation in the real estate market.
  2. Prevent further writing down of bank owned assets.
  3. The banks get paying customers living in those homes.
  4. Banks get a little something for the effort to push paper a little faster.
  5. Homeowners who pay their mortgages also pay their taxes (e.g. tax revenues go up).

So the take home message (my completely non-professional opinion only) is:

  1. Don’t expect mortgage rates to jump above 6% anytime soon. The government simply can’t take the hit.
  2. An expedited and incentive based program will speed up the short sale process, but I wouldn’t expect home sales to jump substantially.
  3. Getting approved as the buyer of a short sale will be just as difficult as it is now because the same gate keepers are still in charge. Meaning, the banks must still approve the write down of the original mortgage, and approve the buyer for the mortgage.
  4. If you’re a real estate investor, there will likely be plenty of time to sort through the plethora of bargains still on the market. You may not have the pick of the litter, but there is still a lot of inventory to choose from.

When you consider just how high the spike in the real estate bubble really was, I’m not sure anything can prop up the housing market… except lower prices.


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Posted by CJ   @   20 March 2010 3 comments
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Mar 23, 2010
1:37 pm
#1 FrauTech :

I think your analysis is spot on. I suspect that prices won’t really be dropping so much because banks and homeowners just can’t tolerate another drop. However I think we can expect them to stay very flat in the next two years at least. Because at some point inflation will start going up again this will mean people are losing value in homes, the price will be effectively “dropping” for prospective buyers, but people won’t be getting any more underwater than they are now.

Mar 24, 2010
11:14 am
#2 Matt SF :

Thanks Frautech. I’m thinking real estate prices can fall a little more in certain overbought areas, but as I said, the government is doing a lot to keep that from happening. Tax incentives, expedited short sales, etc., to keep deflation from popping up.

Which begs the question: is it better to have this happen all at once, or slowly over time. I prefer my BandAids to be ripped off quickly, but that’s just me.

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