Orlando Real Estate

Short Sale Guidelines

January 13th, 2010 7:26 AM by David W. Welch

Are short sales getting any better? Mary Shanklin writes about the new guidelines in the Orlando Sentinel today. My observations suggest that not much has changed with short sales amid the optimism that they are getting better. I have been tracking the percentage of short sales closed of the total number of pending short sales for several months. What I have observed is that the success rate is running between 8% to 10% per month. In Orlando that translates into between 400 and 550 short sale closings each month. Unfortunately, there are about 5,500 pending short sales and another 5,000+ active short sale listings.

I do see this situation getting better after the first quarter for a few reasons. First, The Fed will stop purchasing mortgage backed securities around the end of the quarter. This open market activity has done two things: kept the mortgage markets liquid (lower interest rates); kept the heat off the banks with bad loans. With this in mind, watch for significant upward pressure on interest rates by the second quarter. I also expect that the banks will have a lot more incentive to settle short sales and modify loans. The new guidelines become required for TARP recipients in April just in time to give the floundering short sale departments some type of structure and incentive to get deals approved. I also believe that we will begin seeing more improvement in employment and overall confidence in the economy. This will begin to stem the flow of distressed properties coming to the market. Also, banks should start to get serious about loan modifications which should slow the number of distressed properties for sale.

I am not expecting economic miracles, just steady improvement for 2010.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen On HGTV's House Hunters

Posted in:General
Posted by David W. Welch on January 13th, 2010 7:26 AM


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