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More than 3,300 Denver-area home sellers in the Denver area avoided foreclosure last year by completing a short sale, almost a 19 percent increase from 2009, according to a report released today.
Stephanie Fix, a broker with RE/MAX Professionals in Cherry Creek, analyzed data from Metrolist.
“I’m pretty confident in these numbers,” Fix said, with one caveat. “I pulled these numbers from Metrolist, so they are as accurate as Metrolist. So there might be a little bit of an error factor.” A short sale is when a lender agrees to accept a sales price for less than what is owned on the mortgage.
County breakdown
In the five counties she analyzed – Adams, Arapahoe, Denver, Douglas and Jefferson – she found a total of 3,332 short sales. Her numbers include single-family homes, townhomes and condos. Short sales accounted for 9 percent of all closings.
Fix estimates 60 percent to 70 percent of her transactions last year were short sales. She is a Certified Distressed Property Expert, or CDPE.
Jefferson County, with 517 short sales, saw the biggest year-over-year percentage increase, rising 25 percent from 2009. Arapahoe County had the most short sales with 884, or 26.5 percent of the total.
20 luxury home short sales
She also found that 20 of the home short sales were for $1 million or more. The most expensive short sale was in Castle Pines Village at $2.45 million. The majority of them – 81 percent – were priced at $250,000 or below.
Fix was surprised there were not more seven-figure short sales last year. Fix currently is listing a short sales home in Cherry Creek with a $1.457 million mortgage, and she knows of a couple of other short sales in that area.
While most of her work is in Denver, last year she sold a home in Plum Creek in Castle Rock for $850,000, which had previously sold for about $2.5 million. It had a first mortgage of about $1.8 million and a second mortgage of about $245,000.
She said one number that is bandied around is that banks typically will accept 85 percent of the market value in a short sale.
“But it is really difficult to say,” Fix said. “I don’t know what algorithms banks used to determine what price they will accept. But typically, they are not fire-sale prices.”
Short sales growing
Fix, however, thinks that short sales will become more popular in the Denver area and across the nation this year.
Lenders prefer short sales to foreclosures because they are less costly to them. One national figure often quoted is that a bank typically loses 40 percent with a foreclosure, but only 19 percent in a short sale, she said A short sale typically damages a borrower’s credit less than a foreclosure, and does not cause the emotional devastation of a foreclosure, she added.
No cost to sellers
“And the word really needs to get out that there typically is not cost to home sellers when they do short sales,” Fix said. “I think more homeowners would be willing to do them, if they knew that it wasn’t going to cost them anything. The bank pays for the commissions, the title work, everything,”
The distressed homeowner, however, does not receive any proceeds from the sale, but in some cases can receive $3,000 in moving expenses.
However, Fix said that distressed homeowners should be starting the process earlier. “A lot of times I get a call a week before the home is about to be sold at the public trustee auction, and that is often too late,” she said.
She suggests that owners having trouble making a mortgage payment contact the non-profit Brothers Redevelopment in Edgewater as soon as possible. Brothers runs the Colorado Foreclosure Hotline at 1-877-601-HOPE.
Meanwhile, on Feb. 1, changes take effect the in the U.S. Treasury’s Home Affordable Foreclosure Alternative Program, or HAFA, which could make it easier for homeowners to qualify for a short sale, she said
Some of the HAFA changes include:
Buyers seeking a short sale will get an answer or an agreement form the bank within 30 days.
Banks are no longer required to verify the finances of homeowners.
Occupancy requirements have changed.
And short sales are not for the impatient.
Her research found that a short sale, on average, took 160 days to close last year, almost double the average days on a market for a market sale.
One concern in the past is that Realtors have not been reporting short sales correctly on Metrolist. Fix looked at the “broker remarks” part of the form and only found 10 or 15 cases when the Realtor had not disclosed it was a short sale, but had mentioned it in comments.
“Of course, I have no way of knowing how many agents did not report that information at all,” Fix said. “But I think as real estate agents become more familiar and comfortable with short sales, the reporting will become better.”
