The market is trending toward short sales as lenders lean more heavily on disposition methods that aid distressed homeowners while making it easier for lenders to resell homes that have spent less time in a state of distress, RealtyTrac vice president Daren Blomquist told HousingWire Thursday.
Blomquist suggested the financial incentive for lenders somewhat favors the short sale disposition model since the average short sale brings in about $175,000. That is much higher than the average REO resale, with average sales hovering in the $147,000 range.
Blomquist noted that REOs tend to sit longer, cutting into their marketability and value. Whereas, short sales give the distressed borrower an easier way out, while ensuring a property doesn’t sit in REO for months on end losing its potential resale value.
Blomquist said the trend toward short sales may also be part of a strategy where banks “are taking the loss right away rather than using a delay and pray type of tactic.”
While Blomquist expects foreclosures and foreclosure starts to rise in the second half of 2012, he describes the foreclosure-release pattern as one that is very “cautious, with a managed flow,” so he believes it’s unlikely the market will find itself awash with an influx of foreclosure listings.
Foreclosure starts that ticked up in the earlier part of the year could very well transition into more foreclosures while new starts pick up, Blomquist said.
With borrowers underwater and keeping their homes off the market until they regain value or equity, some lenders may view this as a good time to roll out distressed properties since there is a shortage of desirable inventory in certain markets, Blomquist suggested.
kpanchuk@housingwire.com
