Real estate agents are complaining that some homes marketed as short-sale properties are not actually short sales. In a short sale, the lender signs off on a real estate transaction in which the sale proceeds fall short of what the owner owes for the mortgage.
A decline in the home's value since the date of purchase, or a seller falling behind on mortgage payments do not automatically qualify a home as a short sale. There can be no short sale without the lender's approval, as the lender must consider whether it is worthwhile to accept less than the full loan amount in order to avoid a foreclosure.
What is there to gain by marketing a property as a short sale that isn't a short sale? Serious buyers are a rare breed in some market areas these days, and many of them are looking for bargains. Short sales can in some cases sell for a lower amount than comparable properties that are not similarly distressed, as there is urgency by sellers to get out from under the properties and by lenders that wish to avoid costs associated with foreclosure.
So just like those furniture stores that seem to perpetually advertise a going-out-of-business-everything-must-go-including-the-plastic covers-on-our-electrical outlets-final-ultimate-last-possible-ever-chance-to-buy-cheap-stuff-from-us sale, dangling the "short sale" term in marketing a property may be an effort to attract bargain-basement shoppers.
Short sales and other properties in some stage of foreclosure have become a substantial market segment in some hard-hit areas. Steven Thomas of RE/MAX Real Estate Services in Orange County, Calif., reports this month that "short sales and forelcosures in Orange County account for 23 percent of the active inventory, up from 21 percent two weeks ago and 19.3 percent a month ago," and short sales and foreclosures also account for 30 percent of all escrows opened within the prior month, and 38.3 percent of all homes under $500,000 in that market area are either a short sale or a foreclosure.
And Tamara Dawn, a real estate broker in Sacramento, Calif., compiled statistics for Sacramento County which found that about 52.7 percent of all pending sales for the 30-day period ended Nov. 7 were short-sale and REO (bank-owned) transactions, and these property types accounted for about 46.6 percent of all active listings in the county as of Nov. 7.
http://blog.inman.com/inmanblog/2007/12/when-a-short-sa.html
