Short sales and housing shortages

A press release last week assures that the process for getting short sales approved is about to get easier. As you know, a short sale is the sale of property where a seller (debtor) agrees to sell for less than they owe. Although attractive to lenders and sellers alike, this process has been far too arduous for all but the most tenacious of buyers and can take months to complete.

Arguably, all parties benefit from a short sale as the process eliminates the need for lengthy court proceedings and the accompanying, expensive legal fees the lender has to bear to follow due process. At least until the end of this year, the debtor is usually forgiven the balance owed above the selling price and their credit is not as damaged as with a foreclosure.

In fact, this year we have begun seeing properties offered short with greater frequency than foreclosed properties yet the process is far more challenging. Now, according to the press release, the process has been somewhat simplified;

"Beginning Nov. 1, Fannie Mae and Freddie Mac gave nine private mortgage insurers the ability to approve short sales and deeds in lieu of foreclosure for distressed homeowners without requiring a separate review. The move is expected to reduce delays, costs and uncertainty involved in processing short sales and deed in lieu, according to mortgage giant Freddie Mac.

"Under the new agreement with the private mortgage insurers, the government-sponsored enterprises (GSEs) will allow the insurers to approve short sales or deed in lieu of foreclosure who have a Freddie or Fannie-backed loans without requiring a 'separate and potentially time-consuming review' by the mortgage insurance companies."

"We applaud the nation's mortgage insurers for committing to work with us and our servicers to help more borrowers obtain short sales and other foreclosure alternatives," says Tracey Mooney, a senior vice president at Freddie Mac. "By paving the way for more borrowers to avoid foreclosure, today's announcement will support the housing recovery and help reduce taxpayer losses."

The move is part of Fannie and Freddie's effort to streamline the short-sale approval process. For example, the mortgage giants also recently announced they would be offering up to $6,000 to second-lien holders in order to expedite a short sale.

"Short sales and deeds-in-lieu are important tools to prevent foreclosures and help struggling borrowers," says Leslie Peeler, a senior vice president at Fannie Mae. "These delegation agreements create an even more streamlined process that will ultimately help more families avoid the costly effects of foreclosure and benefit taxpayers."

So there you have it. The short sale process could accelerate, giving those with less fortitude an opportunity to buy up some of the discounted property on the market without fear of a lengthy process during which their financial position could change. Now, the problem becomes for many, that these discount properties will disappear more quickly.

Across the country and here in the West we are seeing declining inventories that are making home purchases far more competitive than just a year ago, even as prices inch up;

"Recent price increases are not deterring buyer interest," notes Lawrence Yun, NAR's chief economist. "Rather, inventory shortages are limiting sales, notably in parts of the West. For example, sales of homes priced under $100,000 in the West have dropped 47 percent from a year ago."

Locally, our housing inventory is running nearly 13 percent below this same time last year. Our sales of distressed properties is now around 35 percent of total home sales compared to more than 42 percent last year which demonstrates a decline in inventory similar to what is seen in other markets.

Trust an expert...call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.

Kim Cooper is a real estate broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling (208) 667-0664.