Friday, November 15, 2013

SHORT SALES PROSPECTS REVISITED

I was rereading my article on ARE SHORT SALES VIABLE REAL ESTATE PROCESS IN THE CURRENT ECONOMY?

I realized that I did not adequately explain why short sales will be around for a while longer.

First you have to understand that not all real estate sales are reported because many of the most recent sales (within the few couple of years) have been in the form of bulk purchases by huge hedge funds, REITS, and other private investors. These agencies and companies are governed by a different set of laws and regulations than banks and thus these sales typically do not go through the MLS and often are not reported. The sales may not show up in the typical references used to gage home sales. These real estate deals are often referred to as the shadow inventory because the sales are hidden in the shadows of the market place. I am not implying they are black market or illegal, just not reported in the typical way that most people are accustomed. So on the surface it appears that sales of homes have been dropping. In my opinion this is not a realistic view of the real market.

On the one hand we look at charts that say sales are dropping and prices are rising, generally speaking. But in the back ground you will also see that the total number of short sales is actually growing and fairly consistently. Many investors have over paid on property because they see the prices rising and assume the actual supply is shrinking.

I gleaned this information from another excellent webinar that was presented by Karl Falk and Jerami King. They referred to references from the MORTGAGE BANKERS ASSOCIATION and CORELOGIC in coming to the conclusion that short sales are not going away. After the webinar I went online to try to view and verify the CORELOGIC source in particular, but decided I could afford the pricey membership fees. I have no doubt that the numbers for CORELOGIC are accurate for what they received, but they just don’t receive all the sales records in the current economy and under the current buying and selling practices.

We have also been somewhat mislead by the statement that foreclosures are declining. While,.here is the logic. If a bank, or FREDDIE MAC, or FANNIE MAE, or HUD know that they are going to sell off their NPL (non-performing loan), they don’t start the foreclosure process because it very costly and would be a waste of money. They just let the people live in the house until the bank or agency sells the note or house. They let the new buyer worry about either foreclosing or renegotiating with the current owner.

I am not really going to go into the illusion that foreclosures have declined right now. There are a number of reasons that this idea is not correct, but that will take a whole new blog.

I am going to reiterate that short sales will be around for several more years, and people should be studying and equipped themselves for the onslaught that is to come.



No comments:

Post a Comment