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19% Versus 40%

After holding fairly stable for a year, pending home sales declined in the face of job losses and an eroding economy, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in November, fell 4.0 percent to 82.3 from a downwardly revised reading of 85.7 in October, and is 5.3 percent below November 2007 when it was 86.9. The current index is the lowest since the series began in 2001.

In the midst of all this NAR reports that the number of Short Sales accounts for 18% of home sales, and that number is growing, although measures need to be put in place to speed up the process.

The Short Sale is an excellent tool for helping lenders to minimize their losses and move buyers into homes but the process is not for the faint of heart.  A recent Wall Street Journal article referenced a survey by Campbell Communications which noted that lenders average 4½ weeks to provide an answer to a short sale submittal; many taking over 2 months.  At the same time the response rate on an REO is 2½ weeks.

Mentioning the short sale conundrum this month was NAR President Charles McMillan, who when talking about relief for the housing crisis said: ““NAR advocates expanding a $7,500 tax credit to all home buyers and eliminating the repayment feature, and permanently raising loan limits to bring down interest rates for many buyers in high-cost areas. We also need to expedite short sales and unclog the mortgage pipeline.”

Redfin was quoted last year having reported that out of 65 Short Sales represented by its agents during the first quarter, they only expected 2 to 3 to close.  So why, according to Clayton Holdings, Inc. (an information and analytics company serving lenders), if the average loss to the lender is roughly 19% of the loan amount in a Short Sale and 40% in a foreclosure, is the Short Sale so difficult?

There are a number of elements in the approval process that impact the approval from the lender’s staffing issues to the fact that many loans have been converted to securities and there are now investors involved.  Add to that the complex nature of the documentation involved and you have the makings of a lengthy process.

But, according to Jacob Swodek the author of the Certified Short-Sale Professional (CSP) course, there are a number of things you can do to avoid unnecessary delays … “Each lending organization has its own set of procedures and requirements.  It is your responsibility to extract these guidelines and fulfill them.”  One of the common mistakes agents make he says is to begin by going to the foreclosure department when it’s the loss mitigation department they want.

With all the changes in the wind today is the Short Sale still a viable option?  NAR says Short Sales are increasing as do a number of industry experts.  Many predict the current market conditions will favor these transactions well into 2010.  For those agents that have made the commitment to learn the nuances of the pre-foreclosure and Short Sale process this market will continue to be an excellent business resource for the immediate future.  But success takes a great deal of patience and the ability to hold all the parties together during all of the inevitable bumps along the road.

If you want to learn more about the secrets to succeeding in the Short Sale market, a great place to check out is the Certified Short-Sale Professional (CSP) course that is now available online from RealtyU. 

For all the details visit   http://www.realtyuonline.com/cspcourse/splash_page.htm.

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