A while back we released the 2nd Quarter Foreclosure (REO) & Short Sales Report, which not only debuted another revision to the methodology that decreased the counts of foreclosures and short sales significantly, but also showed positive trends in this market segment. Good signs included:
- New Lender Mediated listing activity has remained steady over the last 5 quarters
- Lender Mediated sales continue their 3-year trend – going up and up each quarter
- Lender Mediated inventory for sale has been dropping due to the capped new inventory and skyrocketing sales
- Lender Mediated median sales prices are showing a potential bottoming.
One thing that has helped stem the tide of new lender mediated listings is the substantial {decrease of Sheriff Sales over the same time last year}, which has lead to fewer new bank owned homes coming on the market. Due to the 6 month redemption period after Sheriff Sale that most foreclosures include, there is likely to be far fewer new bank owned listings coming on the market until the end of 2009 and early 2010- though it appears likely that a new wave of foreclosures is likely to hit in 2010.
The other component of lender mediated listings, short sales, are a significant part of the listings we have for sale today (approximately 15%) but make up a miniscule number of the closed sales (5%) according to the analysis of June’s sales activity… the first month in which we could break out bank owned homes and short sales separately. Reasons for this include the following:
- Short sales are listed at a price that is not guaranteed to be sufficient to buy the property; the Seller needs to negotiate with their lender or lenders
- This negotiation process can take 3 weeks to 3-4 months and often ends with a counter-offer of rejection from the Seller’s lender(s)
- In my experiences with short sales, approximately 1 in 3 offers leads to a successful closing
Getting back to the title of this article, why do Traditional Sellers have a window of opportunity?
- With new bank owned listings at reduced levels and less than a 2 months’ supply of inventory, many buyers will not find what they are looking for with such a relatively low number of these listings.
- The first time home buyer $8000 tax credit expires on November 30, 2009 and most transactions take 3-5 weeks to close after an offer is made.
- Buyers will have to have chosen and negotiated on a house by the end of October to have a reasonable assurance of closing prior to the expiration of the credit.
- Banks do not have great concern over deadlines when dealing with REOs, so they are not likely to consider November 30th a “make or break” date even though the buyer will.
- Buyers making offers on short sales risk missing the tax credit if the answer from the seller’s lender takes to long or isn’t acceptable.
- In the coming weeks Buyers will find that the only option they have available to them has been the one who has been ready and waiting for this moment: the Traditional Seller.
If you are a Traditional Seller and your house is currently listed, keep it listed through Halloween if you can. In past years the market quickly quiets after school starts but this year appears to be very different. If you’ve been considering taking an additional price reduction, take it as soon as you can so you are priced correctly when the buyers interest swings your way this will likely be you last-best-hope for selling till March 2010.
