Homes By Parks – Blog

Short Sales earn their name as a result of the first or second mortgage company accepting less than the Sellers’ full pay off amounts to close the sale to a new home Buyer. The lender is short anywhere from a few thousand dollars to 40% write downs of the balance, although in Denver typically, that amount is around 15%, much lower for homes priced at $100,000, much higher for homes priced above $1,000,000.

Sellers man qualify for a Short Sale if they have had a material financial impact since their purchase, and simply cannot make the payments. For example, a job loss, major illness, divorce, or job relocation. Loan modifications may be an option, but require qualification. Even so, 68% end up in foreclosure within 6 months, while 20% fail to even make the first new payment. Bankruptcy is oftentimes too radical a solution, remaining on one’s credit report for 7-10 years.

According to the Wall Street Journal 11/23/2009 : 1 in 4 US homeowners is “underwater”, with a loan balance greater than the market value. Nationally, 1 in 7 homeowners are at least 30 days late on the mortgage payment. Regionally, there are vast differences. The same states lead the depreciation parade as did during the S&L Crisis of the 1980’s: California, Nevada, Phoenix, Florida, Georgia.

Among the greatest questions: Has Denver hit the bottom of the depreciation curve……yet? It’s a moving target where areas like Montbello, Commerce City, and parts of Aurora have yet to clear out more short sales and foreclosures while more stable areas like Washington Park and Highlands Ranch have already begun a modest recovery in their respective median price points. Otherwise, the higher price points in those two communities will continue to see greater Seller Concessions and price reductions in order to entice Buyers to contract and close.

The “W” theory of recovery is  valid, holding the forecast that we are yet work through a second wave of depreciation. Thanks to Adjustable Rate Mortgages (ARM’s), and Alt A Loans (less than prime but better than sub prime), rate resets, or increases are programmed to go into effect over the next 3 years, thanks to their originations in 2005-2007, if not earlier.  The average payment reset increase is nearly 60%, a real budget destroyer. Working through the excess inventory is forecasted to take through 2012 with great variation among different markets nationally.

Regardless, homes that back to open space, greenbelts, parks, and golf courses will continue to compete with advantages in the marketplace. Additional trends and graphics to follow in future posts. Thanks for visiting our site.