Posted by: gaylehendersoncdpe | August 25, 2009

Metro Phoenix Real Estate Market Update

Recently I participated on a national audio conference.  The four-member panel, included  National Vice Presidents of short sale- foreclosure operations in two major lending institutions, a real estate and mortgage research analyst and myself; moderated by a national mortgage newsletter editor.  The two hour webinar was attended by several hundred REALTORS and mortgage professionals eager to learn about current trends in the housing industry as it applies to foreclosures and short sales.  With my short sale expertise and dedication to helping homeowners avoid foreclosure, I am impressed at the strategies in place and in the planning by these two major lenders.  Their commitment to the short sale process is a shift to assist in stabilizing the local housing communities through short sales, arguably representing less loss to the lender than foreclosure.

I still hear statements that short sale and foreclosure are the same.  Nothing could be further from the truth.  Bottom line; the foreclosure is more costly to the homeowner, the community and the lender.  A home that sells in a short sale triggers both a 1099 for the lenders total loss, which is the difference between the original debt and the net received by the lender after all costs of sale are taken into account.  In many instances a deficiency judgment for the lender loss can be pursued as a collectible debt.  Not all residential properties in Arizona on 2.5 acres or less, carry debt that escape deficiency judgments.  Recent Arizona legislation further defined and restricted those residential properties exempt from deficiency.  A lender’s loss in a short sale is proven, in the majority of cases, to be less than when it goes to foreclosure.  The majority of short sales are in better condition, still maintained, and look like a normal sale except with a contingency that the seller’s lender, approve the sale for less than the indebtedness, due to hardship.  The foreclosure adds legal costs, eviction costs, cleanup costs, maintenance and carrying costs at an average of nearly six months, longer.  At the end of the process with a trustee authorized sale to the end buyer, a 1099 is still issued to the foreclosed owner and a deficiency judgment may still be enforceable all at a significantly higher cost (perhaps 30% or greater loss than at the short sale level).

As we reflect, mid-year, on the state of the economy -nationally, regionally and locally, we see  the combined efforts at all levels is critical to healing the housing crisis at neighborhood levels.  I am pleasantly surprised when neighbors of a property facing foreclosure, are hoping for a successful short sale.  The public is now more aware that the short sale today may become the foreclosure in several months devalued even more, with greater economic damage to the neighborhood. 

The distressed property sales define the current market.  Each month nearly 80% of the sales represent REO (bank-owned) and short sales.  50% of the inventory is non-distressed and yet represents less than 20% of a single month’s sales.  The brisk activity is truly under $300,000. And the challenge that faces the luxury market is squarely rooted in the statistics. Throughout the first seven months, sales over $400,000 represent less than 4% of total sales. To compete in today’s market, a Seller must be laser-perfect on list price demonstrating true value to the buyer who will not overpay for anything in today’s economy.

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