San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

As a San Jose Shot Sale Agent, I have evangelized about the benefits and importance of short sales in comparison to foreclosures.  However, the volume of short sales relative to the rest of the distressed properties has catapulted into number one position according to Campbell Surveys.   This will come as no surprise to buyers who are in the market right now in Silicon Valley as First Time Homebuyers are snapping them up like hot cakes.

Unfortunately, until we resolve California’s double digit unemployment rate, we will continue to have a steady flow of  short sales for possibly years to come.

This is an excellent article about the general overview of how short sales are reaching into the mainstream of the real estate industry.

The article, however, leaves a false impression that the REO listings are receiving more money because they close at 99% compared to 91% for short sales. However, there are plausible explanations for the differences in those two closing ratios.

1.  Short Sales generally have to start off at market price and require systematic price reductions which must be justified to the lenders for them to agree to the sale. Because buyers want deals but the lenders want to start with market price, price reductions are inevitably built in to the process.  Whereas in a REO, the bank and its accountants have pre-determined their bottom-line net price, which is typically below market rate.  Because they are dealing with bottom-line net prices, the banks will rarely agree to accept prices that are far off their list price, if at all.  By contrast, there is a bit more latitude in negotiating price in a short sale.

2.  In addition to having to start off at market price, comparable short sales generally list at a higher price point because owners typically live there and take better care of their homes where their family still resides; compare that to an REO where the owners often destroy many components of the house during the eviction process.  Short sales show better so are also more popular because they are closer to move-in condition that REOs.

So despite the impression that short sale properties receive less money, the reality is that short sale properties, sell at higher price points for comparable properties, yet close at a lower ratio relative to list/sold price because of the lenders demands to list at or near market price.

There has been quite the debate as to whether the Federal Government’s credit to first time home buyers actually helped stimulate purchasing activity or not.  The premise was based on the notion that in order to stimulate the depressed housing sector, an $8,000 credit towards first time home buyers would give incentive to those who otherwise would be renters into taking the dive into the world of home ownership.

The argument on the opposing side was that the program was merely wasted stimulus money because those first time home buyers who were going to buy were going to buy anyway because bargains could be had, so giving them a tax credit did nothing but throw money at people who were going to buy anyway.

Which side was correct?

Some recent sales data may shed some light into whether the Federal Incentive was a success or failure.

http://www.google.com/hostednews/ap/article/ALeqM5hnu6sB3PemlhadTaizNLLJMgRONAD9COFKEO0

According to the article above, November pre-owned home sales increased 7.4% over the previous year and translated into 6.54 Million homes sold.  The surge is the highest in the past 3 years.  Much of that activity was attributed to the tax credit.

“About 2 million homebuyers have taken advantage of the credit so far, the National Association of Realtors said Tuesday. The group forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year’s levels, a record jump.”

The results of a Campbell Survey which is conducted on Real Estate Agents nationwide on a monthly basis reveal an interesting side effect to the extended tax credit.  The extended tax credit also permitted existing home owners to participate in the program by permitting them a $6,500 tax incentive.

Rather than seeing a lot of activity by the first time home buyers as anticipated, there was, instead, a dramatic spike in current home owners participating in purchasing activities.

“The first-time homebuyers started to lose interest in October when it appeared that Congress wouldn’t extend the credit. When the credit was finally extended in early November, current homeowners jumped at the new opportunity for a tax credit on their home purchases.”   Said Thomas Popik of Campbell Surveys, explaining the results.

Regardless of whether it was the first time homebuyers or current home buyers, what is clear is that there was a dramatic increase in sales activity as a direct result of those tax credits, which means the program was successful in getting people to buy homes.  And that is a good thing for everyone.   What is clear is when homes are sold, that leads to jobs in ancillary industries like mortgage brokers, home inspectors, Title and escrow professionals, handymen and contractors, hazard insurance sales professionals, lawn care professionals, etc……