Short Sale Highlights From Core Logic’s 2010 Report

– Core Logic Releases Its 2010 Short Sale Research
Here are a few noteworthy highlights I found after reading the twelve page report:

Short sale volume has tripled since 2008.
Short sale annual volume is currently at 400,000 and growing and will remain a necessary part of the market in the near future.
California, Arizona, Florida and Texas make up over 55% of this volume alone.
According to the report, foreclosures losses are about 12% more, on average, than a short sale.

Freddie Mac recently reported that short sale volume is up over 700% since 2008.
The need for short sales will continue. At present, some 25% of all U.S. mortgages are in negative equity — homeowners owing more than their properties are worth. In some states, like Nevada, that number can go as high as 70%.
Other government programs, like the Home Affordable Foreclosure Alternatives Program, are actually intended to drive short sales. To curb foreclosures, that program offers cash incentives to key stakeholders (including homeowners) to execute and close short sale transactions. Its success, however, has been hampered by what officials have acknowledged may be a lack of necessary antifraud protections.
Fraud is the number one concern for lenders. The greatest concern seems to be when Realtors withhold other offers and only submit an “investors” offer which is of course lower than the market value. Subsequently, the lender accepts this offer and the Realtor then assist the investor in the sale to another for a higher price quickly after the investor purchased the short sale.
Impact on the Industry
The financial impact of such unnecessary losses on the lending community is significant. As shown below, we (Core Logic) estimate that lenders are incurring nearly a third of a billion dollars in unnecessary loss annually.
ESTIMATED FINANCIAL IMPACT
► Estimated Annual Short Sale Volume 400,000
► % of Short Sales with Unnecessary Loss 1.87%
► Average Amount of Unnecessary Loss $41,500
► Estimated Industry Financial Impact $310,000,000
The report concludes with a warning to not lock out investors by over reaching, but to require additional disclosures such as a Realtor disclosing if they have any constructive knowledge of additional relationships occurring. My words not Core Logics. Additionally, the report suggest a cooperative nature of the industry in which disclosure and sharing of information amongst lenders minimizes this inherent risk.