A client recently asked me, what is a "Short-Sale?" A short-sale is a home for sale that is worth less than what is owed to the bank(s) on the loan(s). The home seller and the agent set the asking price "below market" to attract a buyer and get the home under contract quickly. They usually don't care what the home sells for because the seller is not getting any money from it, they are just trying to avoid foreclosure. Once an offer comes in, it is submitted to the bank(s) for review. Typically, there is a 1st, 2nd and sometimes a 3rd loan on the home. Since the home is usually worth less than the 1st, the 1st lender approves the sale, the 2nd and 3rd lenders aren't entitled to any money, so they say "no," and then they all argue about it for months on end until the 1st lender gets frustrated and forecloses. At that point, the seller is gone, their credit ruined, the 2nd and/or 3rd lender gets nothing and the 1st lender unloads the house as a bank-owned home at a low price. How do Short-Sales effect you? The cheapest homes on the market are often times the short-sales. And since they rarely sell, every market is flooded with inventory of low priced short-sales that are sitting on the market, rotting away, and creating the illusion that homes can be purchased cheaper than they really can, forcing non-distressed home owners to compete with them. When a buyer comes along and wants to buy your home, they will point to 3 to 5 under-priced "active short-sale listings" and say your home is over priced. The short sale system is one that rarely works and is bringing down the value of all our homes, plus feeding the supply of foreclosures. Have you ever wondered why there are so many foreclosures? Here is one piece of the puzzle: Currently, there are 103 "short sale listings" (30% of inventory) in El Dorado Hills, and only 2 (1.9% of them) actually sold last month.
Regional Snapshot: Available inventory of homes for sale in Sacramento county dropped to 5,666 with 1,694 home sales last month. Home buyers are now looking at only 3.33 months of inventory, which in a typical market would be termed a "sellers market." Of the 1,694 sales, 1,100 were bank owned (65%), 219 were short sales (13%) and the average home sales price rose to $190,188.
El Dorado Hills: EDH home sales continue to drag compared to Folsom. It has a lot to do with the fact that homes cost more in EDH. In April, there were 38 sales. 17 (45%) were bank owned and 2 (5%) were short-sales, making 50% distressed home sales.
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