Stern Advice-Prepping for the summer wave of short sales

Wed Jul 25, 2012 11:53am EDT
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By Linda Stern

WASHINGTON (Reuters) - Coming soon to a neighborhood near you: A late-summer wave of short sales, as homeowners, mortgage bankers and potential buyers all race to settlement on bargain-priced homes that are worth less than the mortgages written on them.

"We're seeing a rush already," said Daren Blomquist of Realtytrac, a firm that monitors real estate foreclosures and distressed sales. "There was a big increase in the first quarter and we're expecting that to continue."

A short sale occurs when the lender agrees to let the property be sold for less than the amount owed on the mortgage.

2012 may be the year the short sale market peaks, because of a number of factors. Bankers, pressed by the Obama administration and their own bottom lines, realize they are better off accepting partial payment on a mortgage than taking a home in foreclosure, said Blomquist. Some have created expedited short sales procedures in which they will pre-approve a home for a distress sale and even pay the seller as much as $45,000 to get the deal done.

Sellers with one eye on the clock realize that they could lose a valuable tax break if they fail to complete their short sale by year end. And some sellers -- who have been hanging on "by tooth and nail" to homes worth less than their mortgages for years, according to Elizabeth Weintraub, a Sacramento, California, real estate agent who specializes in short sales -- have decided now is the time.

"It seems to be doubling every year, but 2012 is particularly busy," she said.

In the first quarter of 2012, some 109,521 properties were sold in pre-foreclosure -- a proxy for short sales, according to Realtytrac. That was a 25 percent increase from the same quarter the previous year and a three-year high, Blomquist said.

So it seems like this is the time to make a move. Here is some advice for sellers and bargain hunters.   Continued...