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March 14th, 2012 10:59 AM by David W. Welch
The overall impression of banks' handling short sales has improved. I believe their communication has improved greatly, but their results really have not improved. Over the past three years, I have observed and tracked the closing ratio of short sale pendings. I calculate it monthly as the number of short sales closed as a percentage of the total number of pending short sales. This is a statistic I pretty much made up to monitor the success rate of short sales. This statistic has consistently fluctuated in the 8-10% range. It has been at the higher end of the range for the last six months or so, and December posted better than a 12% ratio before falling back into the 9-10% range.
Despite the fact that on average a short sales still take four months from contract to close, people appear to be willing to wait. Why are they willing to wait? It is all about price and availability. Active REOs have a median list price of $85,750 but typically attract multiple offers, making them hard to get. Active equity sales currently have a median list price of $224,900. Keep in mind that there are more bank owned properties in less expensive neighborhoods, so these are not exactly apples to apples comparisons. Still, you cannot ignore such a disparity in the prices. Short sales on the market right now have a median list price of $114,900. So far this month, the median sales price in Orlando is $115,550. Short sales offer a better price alternative to equity sales, while having greater availabilty than REOs. That is why I say the short sale is really defining our market.
Compared to the number of homes available for sale at the end of last February, the number of REOs available has declined by 54.2%; the number of short sales has also dropped by 54.4%; the number of equity sales is only 23.9% lower.