Short Sale Avengers

Sales of vacation homes dropped nearly 31 percent last year, while investment-home sales fell just over 17 percent according to the 2009 National Association of Realtors Investment and Vacation Home Buyers Survey. While the market was down in all segments, these two categories fell by a greater amount than the sales of primary residences, which fell by just over 13 percent.

Second home sales accounted for 30 percent of all home sales in 2008. This reflected a drop of 33 percent from 2007 and 40 percent from 2005 – the peak year for second home purchases.

Even with the decline in second home sales, demand is expected to remain relatively strong due to the fact that a large segment of the population is in the prime age range for buying vacation or investment property.

By the time a person reaches their 40’s, interest in owning a second home increases dramatically. Currently there are 44.8 million people in the USA between the ages of 40 and 49 and another 40.7 million between 30 and 39.

Second home buyers tend to be more confident in today’s market. With prices down, interest rates down and consumer confidence on the rise, sales of second homes are expected to rise in the months ahead. A survey indicated that 80 percent feel now is a good time to buy a second home, compared to 71 percent of primary home buyers.

Sales facts on vacation homes and investment property purchases:

• 9 percent of home buyers in 2008 purchased a vacation home

• 21 percent of home buyers in 2008 purchased an investment property

• Median price of a vacation home in 2008 was $150,000, down 23.1 percent from 2007

• Median price of an investment property in 2008 was $108,000, down 28 percent from 2007

• Median distance from primary residence for a vacation home purchase was 316 miles; for an investment property purchase it was 19 miles

• Vacation home buyer profile: 46 years old, married, household income of $97,200

• Investment property buyer profile: 47 years old, married, household income of $85,000

• Top Reasons for buying a vacation home:
  • For vacation or family retreat (89%)
  • To diversify investments (27%)
  • To provide rental income (27%)
  • As primary residence in the future (26%)

• For use by a family member, friend, or relative (17%)

• Top reasons for buying an investment property
  • To provide rental income (58%)
  • To diversify investments (38%)
  • For use by a family member, friend, or relative (19%)
  • For vacation or family retreat (15%)

• For tax benefits (13%)

Jeff Scislow has led the industry for years in a variety of categories having sold over 2500 homes. For help with purchasing a Vacation Home or an Investment Property, contact Jeff Scislow, CDPE, CRS at RE/MAX Results (952) 431-3900.

A Short Sale results when the homeowner sells their property, the net proceeds are insufficient to payoff the mortgage balance, yet the mortgage company agrees to accept less than the mortgage payoff amount in order to close the sale. All Short Sales are subject to mortgage company approval and require an extensive amount of work to reach a successful outcome.

There are no guarantees a Short Sale will be approved or ever close, but when the process has been professionally handled by a Realtor familiar with short sale transactions, preferably a CDPE (Certified Distressed Property Expert), the odds of success are greatly enhanced.

A short sale is NOT the same as a foreclosure! There are major differences between the two. A foreclosure should be avoided at all costs, as it does serious, long-term damage to a person’s credit.

In addition to avoiding possible foreclosure, homeowners who have a successful short sale negotiated on their behalf are forgiven large sums of money; oftentimes without a deficiency judgment or requirement to repay!

Short Sale Complexity

Short sale transactions are highly complex. Real estate agents are expected to follow a myriad of specific guidelines incorporated by the mortgage company, as well as by the investor(s) of the mortgage notes. Each mortgage company is different and has their own rules, which of course adds complication and challenges ones understanding of the process. A particular mortgage note could be owned by several investors in different parts of the world, thus requiring multiple negotiations with respect to what each investor will accept as a loan payoff. When a seller has a second or third mortgage on their house, the level of complexity increases almost exponentially and the likelihood of a successful short sale diminishes.

These complex negotiations with the investor(s) and the mortgage companies do not commence until after the real estate agent has negotiated a sale with a buyer for the seller’s house. Finding the buyer is the easy part (relatively speaking). Following the lender and investor guidelines, then successfully negotiating the short sale with multiple parties and closing the deal is the tough part. The average real estate agent has not been trained in the complexities of a short sale and is the reason they close on such a low percentage of attempted short sales.

Sellers experiencing any type of hardship today (i.e. loss of job, death in family, reduction of income, divorce, separation, illness, transfer, too many bills) may qualify for a short sale of their home, even if they are current on their mortgage payments.