Almost everyone who has bought or tried to buy a short sale can attest to this: "Short" is not the word for the time involved.
The reason they're called short sales is because they're on the market for less than the owner owes and require a bank's approval. That's also the reason they often take a while.
In a new report that looks at the Mid-Atlantic area, Rockville-based RealEstate Business Intelligence says it's taking more than twice as long for a short sale to get from newly signed contract to settlement than it takes foreclosures and regular home sales.
The typical amount of time: 87 days, compared with just under 40 for the other types of sales.
And that's for the short sales that actually sold. Nearly half the potential short sales under contract that moved out of the "pending" category were failed deals rather than settlements, RBI said, looking at the first six months of this year.
"This high rate of failure could be due to long transaction times ... which may prompt buyers to leave the deal to seek other options," RBI suggested in its report. It noted that spiked deals could also be a result of banks saying no thanks.
By contrast, the large majority of foreclosures and traditional sales that go under contract are settling, according to RBI's numbers.
For all that, I've heard more hopeful things about short sales from real estate agents this year. Mortgage servicers are apparently getting more responsive to short-sale requests (scroll to bottom of story), after years of complaints about long delays and denials that led to more-costly foreclosures.
If you're thinking of selling your home this way, though, you'd probably better get on the market fast. Unless Congress extends the mortgage debt forgiveness act passed in 2007, deals settled after this year will mean big tax implications for sellers. Debt forgiven by a bank through a short sale (or foreclosure) will once again be taxed as if it were income.
The Baltimore metro area had 212 short sales completed in June, a 30 percent increase from a year earlier, RBI says. Short sales are now hovering close to the level of foreclosure sales, which dropped more than 40 percent in June to 222 settlements.
Together, short sales and foreclosures accounted for 20 percent of the market last month.
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