2012 might be year of the short sale
WEST PALM BEACH, Fla. – March 5, 2012 – More than a quarter of all home sales in Palm Beach County last year were of bank-owned properties or homes purchased in a short sale, a sign of continued stress on a market where traditionally less than 1 percent of sales are of distressed homes.
According to a year-end report released last week by Irvine, Calif.-based RealtyTrac, about 22 percent of sales statewide in 2011 were of homes in foreclosure or short sale. The report measured all deed transactions, not just Realtor sales, said company spokesman Daren Blomquist.
Nationwide, distressed sales made up 23 percent of all home purchases.
What piqued analysts’ interest was not the sheer number of distressed sales, but a shift nationwide and in Florida at the end of last year toward more short sales and fewer sales of bank-owned homes. A short sale is when a lender agrees to take less for a home than what is owed on the mortgage, while a bank-owned sale is of a foreclosed home that has been reclaimed by the lender.
Statewide, short sales were up 3 percent in the fourth quarter of 2011 compared with the same time in 2010, while bank-owned sales were down 32 percent.
“The banks know they lose less money through a short sale then a foreclosure,” said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach. “They don’t have to take ownership, they are not responsible for maintenance, and right now there’s no positive profit involved in this. It’s all about cutting losses.”
In a scenario becoming more commonplace, Realtors said banks are dangling incentives in front of homeowners to make a clean getaway, rather than drag out a long foreclosure.
Realtor Jared Dalto, of the Palm Beach Group at Seawinds Realty in West Palm Beach, said he was about to list a short sale recently when the bank called the owner and offered $10,000 for the deed.
“It was just hand us the deed and we’ll give you $10,000 to get out of the house,” said Dalto, who didn’t know which bank made the offer.
Dalto, who estimates about 90 percent of his sales are short sales or foreclosures, said wait times to conduct a short sale are getting shorter, but that “horror stories” still exist.
“I just closed a sale today that I had for two years,” he said. “But some are getting fast-tracked, which is extremely helpful.”
The short-sale trend was reversed in Palm Beach County.
For all of 2011, RealtyTrac measured a 4 percent decrease in short sales in Palm Beach County compared with 2010.
Sales of bank-owned homes, however, were up 82.5 percent during the same time period.
Blomquist attributed the spike in bank-owned sales to a rush of home repossessions that happened in 2010 before the robo-signing scandal stalled the foreclosure process nationwide. Those repossessions were then resold in 2011 to new owners.
“We expect to see foreclosure-related sales increase in 2012, particularly (short sales), as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock, over the past 18 months,” said Brandon Moore, chief executive officer of RealtyTrac.
McCabe agreed, calling 2012 “the year of the short sale.”
“And next year may be the second year of the short sale,” he added.
© 2012 The Palm Beach Post (West Palm Beach, Fla.), Kimberly Miller. Distributed by MCT Information Services.