Boy do we have a deal for you.
It's a message that real estate agents are able to relay to clients more often these days as new rules have made it easier for short-sale properties to hit the market before they are in the foreclosure process.
"Realtors are aggressively peddling them," said Rick Sharga, executive vice president of Carrington Mortgage Holdings. "The buyers' agents are looking for these opportunities for traditional homebuyers or investors.
Short sales are a phenomenon of the fallen U.S. residential real estate market, in which many homeowners owe more on a mortgage than their homes are worth. In a short sale, the agreed purchase price is less than the seller's remaining mortgage balance.
So these properties go for deep discounts. The deal hinges on an OK by the lender, who's accepting a lower payoff on the existing loan in order to avoid a costly foreclosure.
Short sales done ahead of the foreclosure process sold for an average of $81,621 short of the loan amount owed in 2012, according to foreclosure watcher RealtyTrac, while it says short sales in the foreclosure process sold for an average of $129,817 short of the loan amount.
Locating Listings Online Individual homebuyers and investors can glean potential short-sale bargains by checking out websites such as RealtyTrac.com, ForeclosureRadar.com, Redfin.com and Auction.com — or find other options with a targeted Google (GOOG) search for, say, short sales in their state. The MLS Multiple Listing Service that Realtors use contains listings of short sales properties, which may or may not be labeled as such.
Real estate agents often let prospects know when homes that meet their criteria hit the market, too.
While the overall share of home sales that are distressed properties is falling, per National Association of Realtors data, a growing share of those is the short sale type done ahead of the foreclosure process .
Short sales are easier to find these days. Many are on the market now that lenders have processes in place to more routinely handle short sales as a foreclosure alternative.
Nonforeclosure short sales — short sales done ahead of the foreclosure process — rose 17% in the fourth quarter of 2012 from a year earlier, RealtyTrac data show.
The lift comes amid a changing market landscape. In the past only homeowners in enough trouble to enter foreclosure were qualified to do a short sale, says Daren Blomquist, a RealtyTrac vice president.
Now, he says, with a shifting market and new 2012 short-sale guidelines, banks are giving short sales an OK "preemptively" to foreclosure.
Buyers of all stripes, from traditional house hunters to individual investors and also investor groups are buying these properties. Investors sometimes buy them to fix up and rent out for the income stream.
While buyers' agents scope out short-sale purchase opportunities, "the other type of agents are listing agents, who, through their short-sale listings, help distressed homeowners avoid foreclosure," Sharga said. "They'll knock on doors, send out mailings or send out smoke signals if they can get a listing.
Sharga says in some cases, lenders are partnering with real estate organizations and asking them to contact homeowners to see if they're willing to do a short sale.
Real estate agents are the main contact in helping buyers find properties in general, adds Blomquist.
"I don't think most homebuyers are looking just for short sales exclusively," he said. "They want the best home at the best price in their area .
But because so many short sales are happening, Blomquist says, there's a good chance when buyers look for properties they will encounter a short sale as an option.
If a potential buyer is interested in a short sale, the Realtor and client can sort through the MLS and other lists to see if they can find the mention of a short sale in the listing description. Some of the short sale properties listed are already in foreclosure and some properties aren't.
RealtyTrac compiles sales data by examining sales deeds recorded at the county level, Blomquist says. It tells if a property is a short sale by comparing its sale price to the loan amount on it. If the sale price is less, it considers that a short sale.
RealtyTrac tells if that short-sale property is in foreclosure by comparing the sale data to RealtyTrac's foreclosure data. If the property is in its foreclosure database, then it is actively in the foreclosure process at the time of sale, Blomquist says. A nonforeclosure short sale is simply any short sale — which RealtyTrac tells by comparing price to loan amount — where the home is not in the foreclosure process.
Real estate agents use different ways to find properties for clients. Take Leah Brown at Prudential Alliance Realty in Oklahoma City. She has her clients' property searches set up on an MLS website.
Brown plugs in the criteria for the properties they're looking for on the site, so she and her client can shop the site for the right fit. Last year, she found a property that hit the mark for a client. It happened to be listed as short-sale property in the foreclosure process.
How Investors Find Out Fast Don Shaffer, a real estate agent at Her Realtors in Pickerington, Ohio, specializes in selling short sale properties in Central Ohio. He has investors set up on automated MLS searches, and when a short sale hits the market within their search criteria, they are alerted.
"Short sales seem to be a good avenue for investors," Shaffer said. "Most are sold below market value, so they put investors in positive equity position from the get go.
Investors find out about short sales by tapping into a number of marketing techniques, says Augie Byllott, a managing member of Homeowner Resource, a Champions Gate, Fla., real estate investment firm that buys single-family homes, including foreclosed properties and short sales.
He might buy a mailing list of 30-, 60- and 90-day late payers on various loans from a list broker. Byllott and his associates then glean names from the list and do a direct mail campaign noting that they're interested in buying properties.