A week ago I wrote about a Bank of America program designed to encourage short sales in Florida. Programs such as this signify a shift in banks’ approach to short sales and foreclosures. RealtyTrac reports that the number of short sales approved by banks rose in the second quarter of this year while the length of time it took to sell those home actually fell. Until recently banks have not been very supportive of short sales. The problem has been and still is, there are more parties involved with short sales than sales of foreclosed homes. Short sales often involve two banks (first and second mortgage), realtors, loan servicers, home owners, and mortgage insurance companies. Getting approval of an offer from all those parties can often take two months or longer.
The time line for a short sale is still quite long but banks are making efforts to streamline the process. The driving force behind this shift to sell more homes through short sales is the length of time and resulting carrying costs associated with foreclosing on homes. While a foreclosure sale can happen much more quickly than a short sale, the amount of time it takes to get a foreclosed home to market can be as long as two years. Banks don’t want to be homeowners and they definitely don’t want to own homes that aren’t producing income for two years or more. Another factor is that homes sold through short sale generally sell at a mere 20 percent discount compared to sales of homes not in financial distress while bank owned homes sell at a 40 percent price cut. On a $175,000 home that is a difference of $35,000. By selling homes in short sale banks are also able to avoid carrying costs, attorney fees and repairs necessary to get a foreclosed home to market.
It is clear why short sales should be more attractive to banks than foreclosures. What is surprising is how long it has taken banks to figure out that they can make more money or not lose as much on a short sale and then make a real effort to improve the process. Now the trick will be to make short sales more attractive to buyers. Many buyers aren’t willing or can’t afford to wait two months for a bank to respond to their offer.
There are currently 127 homes listed as short sales in Bend with prices ranging from $54,900 to $980,000. There 55 homes listed as bank owned with prices between $59,900 and $849,000. To see more Bend homes for sale search Central Oregon MLS.
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