About Short Sales

Foreclosures happen when the bank reclaims your property. Short sales are what people do to avoid the bank reclaiming their property (but ironically, the person is still left without their property).

Orange County has taken a lot of flack recently for being an area with a large amount of foreclosures. The reality is, Orange County follows the same trends that most of the metro areas on the east coast have been following.

Let’s look at this way, and we can keep it all on the West Coast. Orange County has over 10% of their listings as foreclosures. On the other hand, Washington has the exact same numbers. Oh, actually Washington has over 11% of listings. So they have even more foreclosure per capita than Orange County does.

One the flip side of things, another important metric to look at is the percentage of short sales. In Orange County, the percentage of short sales has climbed to about 26% of home listings right now.

So let’s think of this way. 1 in 6 listings are short sales in Washington… 1 in 4 listings are short sales in Orange County. 33% more are short sales. That’s a substantial difference. But what is that difference you ask?

More short sales mean that home prices were inflated higher. People bought when the home was ‘worth’ a lot, and then the value of that home fell, so people don’t want to pay on it because really, they’re wasting their money on something that won’t have the same value in a couple years.

This makes for a slow house sale situation. Everybody with their homes for sale are waiting for everybody else to come and purchase their home, and they can’t purchase unless somebody comes and purchases theirs…

So next time you’re in the Orange County area, check out what listings are for sale. Turns out, home prices actually aren’t that bad. Compare them to Denver, and you’ll be happy to see that Orange County doesn’t cost much more anymore.

While we’re on the topic view Orange County Foreclosures and Orange County Short Sales

The first item is a letter to the lender requesting help with your loan. It is important to inform them of the reasons why you need help. The lenders are really willing to work with you because it is more time, work and money for them to foreclose. When you write the letter be sure to include the individuals you will be working with on facilitating your short sale. By giving the lender permission to talk with these people, you will save time and the lender will appreciate the information. Your letter should always include the loan number, address of the property, the full name on title and your real estate agents name and phone numbers.

If one is presented with two investments of equal risk, the informed investor will choose the investment that offers a higher return rate. This is fundamental to personal investing and is called Risk Aversion.

If the investment with greater risk will yield greater returns, an individual may choose greater risk as part of the Risk Aversion process.

Government and mortgage debt traditionally differ by 1.5 percent. The difference between return rates is called the “spread.”

However, the spread started to grow in July 2007.July 2007 marked the “official” start of the Credit Crunch and as mortgage delinquencies grew nationwide, so did the market’s perceived risk of investing in them.

The “spread” almost doubled in a year. On September7, 2008 the takeover of Freddie Mac and Fannie Mae was announced by the federal government. This action offered the “risk free guarantee” for mortgage debt. After the announcement of the takeover the “spread” decreased.

This is one reason why mortgage rates fell Monday and why they should continue to stay low over the near-term. With the U.S. government backing the mortgage market, there’s no room for the risk premium that helped keep rates high this past year.

This will not mean more people will be able to get mortgages. However, those who qualify may find that financing is cheaper.