The Morning Report
Get the news and information you need to take on the day.
Mention the phrase “short sale” to any real estate agent you know and expect a roll of the eyes, at least.
Jim Klinge, a local real estate broker, predicted last week that 2010 would be the year of the short sale.
What is a short sale, and why is everyone talking about it?
Here’s a quick breakdown.
A short sale is a transaction where a homeowner is granted permission from the bank to sell the house for less than he or she owes on the mortgage. The banks typically take the loss.
Often that homeowner is unable to make the mortgage payments on the home and must prove that financial hardship to the bank — often missing at least one payment to even get started. The bank agrees to it to avoid the costs of foreclosing on the home and reselling it.
Short sales take a long time, because the seller has to find someone who’s not only willing to buy the house but also to wait for the bank’s approval of the ultimate price.
These days, that’s taking as long as “FOREVER,” says Kelly McQuien, a real estate pro who sent me a comment on Twitter today.
This is a big deal now because in better economic times, a homeowner who’d lost a job could just sell the home and break even or even make a profit. But now, one-third of homeowners in San Diego who have mortgages are underwater on their loans — meaning they owe the bank more than the house could sell for in the current market.
Despite that hefty percentage, there’s some debate about how many short sales we’ll actually see stemming from the population of underwater homeowners. Short sellers face big hits to their credit and aren’t usually able to buy another house for several years.
Here’s Klinge from my story last week:
“I think that’s why a lot of people are going to stick it out,” Klinge said. “It would take some extra oomph to make it worth it for people,” like an annoying neighbor or a poor location.
Klinge mentioned in our interview that he’d listened in on where banks touted some upcoming fixes to the short sale process. Here’s his rundown of that session.
What do you want to know about short sales? Have you done one? Are you trying to buy one? Maybe you disagree with Klinge that short sales will typify this year. Tell me what you think is the trend to watch.
I’ll be putting together a story soon looking at short sales, so I’d love your help.
Leave a comment here, or you can send me a message: email@example.com.
— KELLY BENNETT