Monday, January 29, 2018 / by Sean Zanganeh
San Diego County’s level of housing distress took a pivotal turn this year. Short sales, once rare deals in the real estate world, now make up a bigger share of the residential market compared to foreclosed homes that have been resold.
Short sales allow homeowners who can’t afford their mortgages to sell their homes for less than what they still owe, as long as the lender says OK. One in five homes resold in the county were short sales, based on August numbers from local real estate tracker DataQuick. Compare that to single-digit percentages seen while the housing bubble began to percolate in 2007.
Short sales are expected to become even more common and easier to close as Freddie Mac, which owns or guarantees a sizable chunk of mortgages in California, will make it easier for borrowers to complete them starting next month. Borrowers will see that the process is considerably shorter and that it will leave less of a financial black mark on their credit histories.
Already boosting the number of short sales is a $25 billion mortgage deal between the nation’s biggest banks and 49 states that settled foreclosure abuse allegations and was signed earlier this year. The agreement essentially forces banks to do more short sales and provide relief to borrowers on expedited terms. Some banks are even offering cash as incentives to get more people to short sell.
“Banks are really motivated to do short sales,” said Matt Battiata, who owns Del Mar-based Battiata Real Estate. “...Banks have decided and learned over the last several years that short sales are a much better way to mitigate loss.”
The end result appears to be good for the housing market.
The increase in short sales means a more dynamic real estate market, fewer losses for banks and increased chances that short sellers could buy homes again after a shorter hiatus.
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