Short Sales become Maine homeowner’s saving grace in troubled housing market

by Martin Macisso

The sight is not uncommon, the same “For Sale” sign has stood posted in front of your neighbor’s home for several months but unlike years past, there appears to be little interest in an otherwise beautiful home. What once symbolized American prosperity now stands as a stark reminder of the stagnant US real estate market and its economy at large.

The problem, at face value, has been the collapse of the secondary mortgage market and ironically, the return of sensible lending to the mortgage practice. It is not as easy for people to qualify for a home loan in 2009 as it was just a few years ago and this fact has left a glut of unsold homes on the market. Unfortunately, the laws of supply and demand can’t be taken over by the government and we as a Nation are forced to deal with increasing inventories of unsold homes and falling prices at a 12% annual clip.

What was once a red hot real estate market where sellers were hosting bidding wars literally on their front lawns, has now been reduced to a more old fashioned and less familiar “Buyer’s Market”, where the prospective home buyer can conduct their due diligence and even make a rationale decision and less of an impulsive purchase. Depending on which side of the fence you find yourself, this new trend has its pros and cons.

As a homeowner, the chances of making off with huge gains are not as much of a “sure thing” as it was before August of 2005. This historic month literally marked the pinnacle of skyrocketing house prices and one can almost recall the sound of the “Housing Bubble” bursting during that infamous summer month. Those unlucky individuals whom purchased homes within the last few years with the intentions to turn them for a quick profit, or for homeowners who are looking to relocate, the uneasy reality of this stale “seller’s market” is beginning to sink in. You might be stuck.

As of May 2009 approximately 22% of Americans are “underwater” on their homes or they owe more to their mortgage companies than what their homes are worth. There are many factors to consider when assigning the blame to this situation, but many academics agree that the Foreclosure Crisis is at the root of the problem. The majority of home sales are coming from distressed properties such as homes that have been reposessed by banks and this is leading the perpetual spiral downward for home prices. A bank owned property is typically sold for around 70% of its market value.

Not all news is bad news for home sellers.

Short sales are now becoming more standard for lenders as they are determined to provide an alternative to foreclosure. The Short Sale process is unique because a bank must approve the release of a real estate lein on a property even when a homeowner still owes a balance because the home sold for less than amount of the total mortgage. This is not easy and a Real Estate Agent experience in the areas of Loss Mitigation is useful in assisting in a Short Sale transaction.

In years past there was no need for a Short Sale but now it appears to be an important option for a homeowner finds themselves in an unaffordable payment or who simpy wants to move elsewhere. There are crucial things to consider when conducting a Short Sale and the Real Estate professional listing the property must be knowlesgable of the various nuances of the process such as dealing with a bank’s Loss Mitigation Departments and the potential taxable events.

Yet the silver lining to an otherwise brutal real estate market is the increasing affordability of declining home values, historically low interest rates and the emergence of exit strategies such as the Short Sale.