Not every home owner lays down and throws in the towel when faced with foreclosure. Many go for the short sale, where the bank(s) are asked to take less than what is owed on the loan(s). Most short sales have been unsuccessful, but a few are making it through to a sale. How short will the lenders go, and what does that tell us about out market?
I don’t know of any database that tracks short sale results. So unless you have been tracking a property, there is no way to identify a sale as a short on the Recorder’s site – they just show up as standard Deeds of Trust. But through my treasure trove of properties held by the Sinners, real estate industry professionals with large portfolios, I have been able to track the results of a couple of short sales.
6272 10 Mile Court was purchased in April 2006 for $450,000 with a $360,000 1st and a $67,500 HELOC (95%). The NOD was filed in March 2008, and I tracked it listed for $350,000 in April. It sold in June for $315,000. The 5% down payment was wiped out, as was the 15% HELOC 2nd loan. The 1st loan was written down an additional 12.5% to close the sale. The property lost 30% of its value between sales.
2209 G Kietzke was purchased in August 2005 for $151,000 with a $120,800 1st and a $22,650 2nd (95%). I tracked it as listed at $139,000 at one point, and reduced to $79,000 in July. It sold in September for $70,500. The down payment was lost, the 2nd was wiped out, and the first was discounted about 42%. The property lost 48% of its value between sales.
The market "standard" on short sale listings these days seems to be about 64% of the peak purchase price – 100% x .8 (wiping out down payments if any, and all 2nd loans) x .8 (market adjustment). I’m not convinced this is enough given where we are today.
This is not meant to be a "definitive" post in any way, just a few examples of what short sales are actually closing for. If you have examples that merit data-digging, let me know. Just beware, you may not want know the results!