Florida borrowers are short selling their homes without defaulting on
their mortgages, a far-reaching change from days when stopping
payments was the only sure-fire way to spur bank approval.
29 percent of all Florida home sales during late summer and early fall
were short sales granted when the homeowner was not yet in
foreclosure, according to a new RealtyTrac measure of non-distressed
short sales. That’s an increase of 32 percent from the previous
Palm Beach, Broward and Miami-Dade counties, 21 percent of sales were
of properties where the owner was not in foreclosure, but owed more to
the bank than the home was worth — a 49 percent annual increase. The
difference between the sale price and unpaid mortgage balance in South
Florida was an average of $106,712.
Blomquist, RealtyTrac vice president, said this is a new trend that
reflects recent federal changes that expand what can be considered a
financial hardship and attempts to streamline the short sale process.
It’s also likely that banks are more reluctant to file a
foreclosure, hoping to avoid years-long foreclosure proceedings in
hearing a lot more about short sales happening outside of
foreclosure,” Blomquist said. “Everyone is celebrating that
foreclosures are down, which is good, but a lot of the reason for that
is distressed homes are being disposed of further upstream.”
a short sale the bank agrees to sell the home for less than what the
owner owes on the mortgage.
federal rule changes only affect loans backed by Fannie Mae and
Freddie Mac, which announced the new guidelines during the summer. The
rules didn’t take effect until Nov. 1.
the changes, borrowers who are current on their mortgage but suffer a
hardship such as a death, divorce, or a job change requiring them to
move more than 50 miles from their home can be qualified for a short
sale by their loan servicers without additional approval from Fannie
bottom line is banks are trying to remedy the number of foreclosures
any way they can,” said Realtor Dean Hooker of Pompano Beach-based
Southeast Realty. “It’s taken them four years to get to this
28 percent of all homes sold during the third quarter in Palm Beach
County were properties in some stage of foreclosure, but the majority
were sold through short sales rather than as bank-owned homes
repossessed through foreclosure, according to a separate RealtyTrac
report released this morning.
12 percent increase in distressed property short sales from the
previous year and 28 percent jump from the second quarter was likely
spurred by the National Mortgage Settlement and pending Dec. 31 sunset
of the Mortgage Forgiveness Debt Relief Act, Blomquist said.
Epstein, a South Florida Realtor with the Keyes Company/Ragbir Team,
said she has 18 short sales she’s trying to close before the end of
the year when the act expires. If it isn’t extended, sellers will
have to count the debt forgiven by the banks in a short sale as income
— an expense that could cost tens of thousands of dollars depending
on the tax bracket and amount forgiven.
is confident Congress will extend the act, even if the vote is taken
next year and it’s made retroactive.
want people to be able to move on and our country to move on,”
distressed short sales also outnumbered bank-owned sales, increasing
22 percent from last year to account for nearly 10 percent of all home
purchases during the third quarter. The shift to more short sales is
happening as “both lenders and at-risk homeowners realize that short
sales are often a better alternative than foreclosure,” Blomquist
it’s also a requirement under the $25 billion National Mortgage
Settlement signed by the five largest banks in March.
than $2.2 billion, or 63 percent, of Florida’s share of the
settlement has come in the form of deficiency waivers for short sales.
Nationwide, about 60 percent of the debt forgiven through Sept. 30 had
been through short-sale deficiency waivers.