Rising optimism fueled by lower infection and rising vaccination rates is effectively switched the lights back on for an economy dimmed by the effects of 2020’s devastating pandemics. Real estate brokers and agents certainly see this in their respective markets as evidenced by low inventory, multiple offers above asking price and rising home values. Short sales, which dominated the market during the mortgage meltdown 2008, weren’t a major factor in 2020. Lender forbearance programs, moratoriums preventing foreclosures, and financial assistance at both the federal and state level averted another disaster in the real estate market. With a healthy housing market and numerous remedies developed to help homeowners survive the financial impact of COVID-19, should agents be ready for a resurgence in short sales? The short answer is YES. Agents should prepare now for the inevitable shift in the market if they wish to remain relevant and successful.
A quick primer on short sales: a short sale occurs when a distressed homeowner sells their property to a third party for less than the amount due on the mortgage. The lender agrees to accept the lower amount to release the homeowner from the mortgage. Real estate is an industry of cycles, and distressed homeowners will always be a part of the equation. While our current period of foreclosure moratoriums and lower borrower delinquency rates may not immediately signal a reason to keep short sales on the radar, the following factors do indicate change is on the horizon.
Mortgage Forbearance Programs Ending.
Under the Federal Coronavirus Aid, Relief, and. Economic Security Act (CARES) Act, homeowner could apply for loan forbearances for up to six months and request a six-month extension for up to one year of total forbearance. Remember, under forbearance plans payments lenders defer payments for an agreed – upon time, but payments will ultimately resume at equal if not higher amounts. Many of those forbearance plans will end during the 2nd and 3rd quarters of 2021, leaving borrowers with little options if they cannot afford to resume payments.
Federal Moratoriums Foreclosures and Evictions Ending.
The Federal government extended mortgage relief to homeowners facing foreclosure to June 30th, 2021. This is the second extension granted, and as the economy continues to improve it may be unlikely that the government will issue another extension. This may result in an uptick of NODs (Notices of Default) and more homeowners will face the prospect of losing their homes.
High Number of Delinquencies Still a Factor.
Almost 2 million Americans are 90 days or more past due on mortgage payments, and 5 times more serious delinquencies occurred in March 2021 than at the beginning of the pandemic. While forbearance and moratorium initiatives brought temporarily relief to distressed homeowners and kept delinquency levels in check, a significant number of Americans are still behind on their mortgage payments and may have no way out.
Short Sales as a Viable Solution
Real estate agents and brokers can position themselves to be in an advantageous position during a rising short sale market, when it returns. Rising foreclosures are inevitable, so it makes sense for realtors to start looking for opportunities. Title companies and other sources with access to public records can provide real estate professionals with data to target potentially distressed homeowners. It additionally benefits agents to cultivate new markets when the cycle of sellers’ market switches to that of a buyers’ market. Foreclosure sales will restart and eventually bring more inventory to market, but will compete with existing inventory and slow appreciating prices.
This is a great opportunity to be prepared for a short sale market. For agents to really take advantage of it, they need to do the following:
- Monitor the data on housing trends
- Learn to identify potential leads
- Know the fundamentals of the short sale process
- Be equipped to discuss the short sale option with homeowners facing foreclosure.
Apex Resolution is here to be a solution for all related needs. Contact us today to build your plan for future success.