Prudential Financial surveyed over 1,000 Americans with a household income of at least $35,000.  Though 90 percent of those surveyed said they thought the home buyer tax credit was effective in helping many first-time purchasers take advantage of real estate investments, 65 percent of consumers that are actually shopping for homes believe the expiration of the tax credits will have little or no effect on their decision to purchase real estate.
The survey also reports that 79 percent feel that real estate prices will increase over the next five years with 20 percent predicting a substantial increase.  46 percent of real estate buyers expect prices to go up in their areas in just the next year. Only 12 percent are predicting the market will experience further decline and expect prices to fall further.

“The survey underscores the key role the federal home buyer tax credits played in stimulating residential real estate market activity and the U.S. economy,” said James Mallozzi, chairman and CEO of Prudential Real Estate and Relocation Services, Inc in a press release the company issued near the end of April.  “It also shows that most consumers believe the market has hit bottom and are more optimistic about the future.”

Despite the general downturn in the real estate market with the current recession, the survey also solidified the belief among consumers that purchasing real estate investments is still financially wise.  Roughly 75 percent of those surveyed believe a real estate investment will provide a better and more secure return than individual stocks, mutual funds or savings accounts. Many of those surveyed that are actually interested in buying a first-time home said low mortgage rates and current lower housing prices are motivating them to make a home buying investment more than any tax credits for purchasing.

In essence, a short sale is getting a lender to take a loss on their initial inflated terms of mortgage, allowing the homeowner freedom from the initial debt. This can be a very convoluted process, since many lenders may be involved and all will have to agree on the loss.  A buyer is necessary as well, and though short sales typically have a very attractive price tag, most of the time cash is the preferred method of payment since convoluted financing is what caused the unreasonable mortgage to begin with, and cash is much better to cover losses than credit that may not be there in the future.  It’s not uncommon for there to be at least 10 or 20 offers on a home being short sold, and oftentimes the offer with the most cash constitution—not necessarily the highest dollar amount, is the most desirable.

This can be a good thing for investors, as they typically have much greater capital than families or first-time buyers, but the process can be extremely arduous and contain rolls of red tape based on the number of parties involved that have to negotiate and agree on the deal. Many short sale offers ultimately fall through.

This is where the Obama Administration is attempting to step in. With a new standardized short sale plan that is rolling out this year, parties involved are required to use uniform documentation, pre-approved terms and accelerated turn-around times in an attempt to avoid the long drawn out negotiations that sometimes ruin short sale offers. It also offers incentives in the way of homeowner relocation grants, mortgage servicing fees, real estate agent commissions and stipends for secondary lenders and investors.

Though the jury is still out as to whether the streamlining will be effective and encourage more short sales to be initiated and taken to completion, it seems any kind of standardization process will be in favor of investors with cash capital that can benefit from purchasing these homes, as well as homeowners that need to free themselves of over-inflated mortgages.

If you are interested in learning more about the short sell process or want to invest in properties that are offered for short sale  please call me at 818-241-5196.