Short Sales Today
June 9, 2011
My attention was caught by a headline in the Riverside Press Enterprise on Tuesday, June 7, 2011
It read:"Housing short sales boost fraud risk".
The article suggests that investors are purchasing properties that lenders have agreed to accept less than the amount owed on the mortgage. The article further suggests that these investors then "flip" the property and sell it for more than they paid and that the property was thus purchased fraudulently since the lender ought to have had the benefit of the second valuation. In my limited direst experience with short sales, lenders send appraisers, often more than one, to determine if the price offered by a potential purchaser is acceptable. It can take long periods of time for a lender to make a final decision as to accepting a short sale, hopefully sufficient time to determine a fair market value. According to the article, a "suspicious transaction" is one in which the property is resold less than month after the recording of a short sale - and sold for at least 10% more. A possible reason for the increased value might be that the short sale purchaser went in and rehabbed the property thus making it more appealing to a future buyer. (Many of today's buyers want to buy homes that are ready for immediate occupancy, not needing rehabbing.)
I can not speak to the data cited for the percentage of homes now selling short and the percentage of homes selling as bank-owned, but I ran the numbers as reported in the CRMLS for closed sales in May 2011. In the fourteen communities that I track, the percentage of short sale closed transactions ranged from a low of 18.2% (Mentone) to a high of 39.1% (Colton). For bank-owned closed transactions the percentages ranged from a low of 29.9% (Redlands) to a high of 57.9% (Banning/Beaumont). These percentages are the reverse of those quoted in the Press Enterprise article.
Lenders do seem to be getting a handle on short sale processing and I would hope that suggesting that sales are fraudulent would not have a dampening affect on getting these properties back into producing an income stream for the lenders.
My attention was caught by a headline in the Riverside Press Enterprise on Tuesday, June 7, 2011
It read:"Housing short sales boost fraud risk".
The article suggests that investors are purchasing properties that lenders have agreed to accept less than the amount owed on the mortgage. The article further suggests that these investors then "flip" the property and sell it for more than they paid and that the property was thus purchased fraudulently since the lender ought to have had the benefit of the second valuation. In my limited direst experience with short sales, lenders send appraisers, often more than one, to determine if the price offered by a potential purchaser is acceptable. It can take long periods of time for a lender to make a final decision as to accepting a short sale, hopefully sufficient time to determine a fair market value. According to the article, a "suspicious transaction" is one in which the property is resold less than month after the recording of a short sale - and sold for at least 10% more. A possible reason for the increased value might be that the short sale purchaser went in and rehabbed the property thus making it more appealing to a future buyer. (Many of today's buyers want to buy homes that are ready for immediate occupancy, not needing rehabbing.)
I can not speak to the data cited for the percentage of homes now selling short and the percentage of homes selling as bank-owned, but I ran the numbers as reported in the CRMLS for closed sales in May 2011. In the fourteen communities that I track, the percentage of short sale closed transactions ranged from a low of 18.2% (Mentone) to a high of 39.1% (Colton). For bank-owned closed transactions the percentages ranged from a low of 29.9% (Redlands) to a high of 57.9% (Banning/Beaumont). These percentages are the reverse of those quoted in the Press Enterprise article.
Lenders do seem to be getting a handle on short sale processing and I would hope that suggesting that sales are fraudulent would not have a dampening affect on getting these properties back into producing an income stream for the lenders.
posted by shirley harry at 9:20 AM
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