Short sales will remain strong for the next several years as foreclosure inventories timelines grow even longer, according to the chief operating officer of Equator, a software platform for default servicers.
“Short sales will be very prominent over the next 2-3 years as foreclosure inventories increase and remain somewhat stagnant. The elongated foreclosure timelines coupled with improved processes and technology will lead to more short sales closing,” says John Vella, COO of Equator.
Equator reports some 775,000 real estate agents handling an average of 250,000 transactions per day access its platform.
Last week LPS reported the median foreclosure timeline now is 587 days. In May, CoreLogic predicted the number of short sales will increase 25 percent next year after tripling over the past two years.
New federal regulations that took effect April 10 are expected to add to the interest in short sales by removing barriers involving second liens. Prior to this change, secondary lien holders were unlikely to receive any portion of the proceeds of the sale. This likelihood was increased if the property was in a state of negative equity. The secondary lien holder could block the approval of the short sale by refusing signoff on zero pay-off.
Due to the change in the laws regulating short sales there are now incentives for secondary lien holders to approve the sales. There is also an incentive for the seller to pursue this option. Secondary lien holders will receive a portion of the sale proceeds; an amount of at least $3,000. They will also receive an additional $1,000 from the federal government and sellers will receive an incentive of $3,000 for relocation expenses.