Realty Trac has released a new report indicating that banks are finally becoming more willing to discount pre-foreclosure properties, and short sell them, rather than continue with the foreclosure process.
Prior to the housing market crisis, short sales were a relatively rare item. Most folks had never heard of them. They were rarely agreed to by banks. In the heady days of the housing boom, HUD usually sold foreclosed properties for MORE than the original selling price.
As a result of this, it has taken the banks literally years to warm up to the idea that short sales actually make sense. In those states that utilize a judicial foreclosure process, it usually takes months to get a foreclosure completed. But banks were very slow to realize that short sales might actually be in their best interest. It has only happened primarily because of the glut of foreclosed properties that is still keeping selling prices low. At this point, it no longer makes financial sense to pursue foreclosure if the property gets an offer during the pre-foreclosure process.
Banks are finally “getting with the program” and are becoming more willing to sell at a discount prior to the foreclosure. According to the Realty Trac report, short sales soared in the second quarter of 2011.
This means that buyers who are looking for a really good deal should also consider making an offer on a property that is headed for foreclosure. It’s generally best to target real estate listings that show that a short sale is already approved. If the property is not yet approved, the bank likely will accept a discounted offer, but you should expect the process of getting approval to to take several weeks at least. I’ve had offers on pre-foreclosure properties that took 6 months to get approved. Sometimes it’s faster, depending on the buyers qualifications.
It has taken several years but the banks are finally beginning to mobilize a strategy for dealing with the foreclosure crisis. But this process will take a lot of time. They won’t be running out of foreclosures any time soon. With more short sales, and the continuing high percentage of vacant, bank owned homes on the market, prices will continue to erode or stay flat in the areas where there have been a lot of foreclosures. But at least there is finally some indication that banks are moving faster to eliminate the backlog.