First-time home buyer interest in short sales have been severely discouraged recently due to processing delays, according to the latest Campbell/Inside Mortgage Finance Housing Pulse Tracking Survey. It is estimated that short sales account for more than one of every six house sales.
The amount of short sales purchases by First-time home buyers has dropped to 39.7 percent of short sale transactions in August. August of 2011 represented the lowest level for first-time home buyers ever recorded by the Housing Pulse survey.
The first-time home buyer share of short sales hit a peak of 54.1 percent of all short sale transactions in November 2009, just before the originally-scheduled expiration of the federal homebuyer tax credit.
Short sale transactions have long been problematic for buyers and sellers alike, with typical approval times of several months after a homebuyer first submits an offer. Factors slowing down short sale approvals include lost paperwork, coordination with multiple investors, slow appraisals, and mortgage servicer understaffing.
Still, for many first-time home buyers, average short sale prices of 27 percent lower than non-distressed properties compensated for the wait time. But with average time-on-market for short sales stalled at 16.6 weeks—with the majority of that time spent waiting for short sale approval—short sale transactions are becoming less popular with first-time home buyers.
Short sales are just one type of distressed property, with damaged REO and move-in ready REO also being significant components of today’s housing market. In August 2011, short sales accounted for 17.1 percent of the home purchase market, with damaged REO and move-in ready REO accounting for 13.2 percent and 15.6 percent, respectively.
The total proportion of distressed property, as represented by the Housing Pulse Distressed Property Index, fell to 45.9 percent in August from 46.2 percent in June.
From this we can see why it’s not surprising that home buyers are becoming frustrated with short sale delays, and what we’re finding is this is causing them to resort to placing offers on multiple properties. As we know, this practice can bog down the short sale approval process for mortgage servicers.
So what are some creative ways maybe you have discovered to ease this process for the home buyer?