Real Estate Blog

Shortsale Transactions Spike 49% In South Florida In 2010

February 19th, 2011 1:07 PM by Sherry Lee

February 8,  2011
Shortsale Transactions Spike 49% In South Florida In 2010
The number of residential shortsale transactions in the tricounty South Florida region jumped by 49 percent on a year-over-year basis in 2010, according to a new report from
Buyers purchased nearly 16,800 residential properties in Miami-Dade, Broward, and Palm Beach counties in 2010 at prices below - or short of - the outstanding loan amount owed by sellers. In 2009, buyers purchased nearly 11,300 properties short of the financing amount due, according to an analysis by the licensed Florida sell-side brokerage CVR Realty™
"All indications are that shortsales will increasingly be the primary focus of buyers searching for properties in the South Florida market," said Hernan Osorio, the director of sales for CVR Realty™. "With the federal government's loan modification program having a minimal effect and the economy failing to create enough jobs to jumpstart the South Florida housing market, more homeowners are being faced with the prospect of losing their residences, either through foreclosure or shortsales. Luckily for sellers who do want out but are mindful of their credit, several lenders are beginning to view shortsales as a viable alternative to the foreclosure process." 
Lenders sold 19,800 residences in South Florida in 2010, down six percent from 2009 when 21,050 bank-owned properties were transacted, according to the report based Florida Association of Realtors data. 
Buyers are still anxious to acquire bank-owned properties but lenders have grown more hesitant to unload these repossessions given the economics involved. 
Prior to the real estate crash, lenders generally expected the foreclosure process to take about six months to complete at a cost of about $40,000 in loss of debt service, unpaid taxes, damage, court fees, and attorney costs. 
With nearly 265,000 notices of default filed against borrowers since 2007, the South Florida court system has been overwhelmed with foreclosure actions. In South Florida today, lenders now plan for an 18-month  repossession process with a cost of about $100,000 per property, industry watchers said. 
In the end, bank-owned properties offered on the open market generate a lower average price than properties that are sold as shortsales.
In 2010, the average shortsale price was $173,700 per residence compared to an average of $110,900 for a bank-owned property. 
Another factor hurting the sale of bank repossessions are the allegations of administrative irregularities - also known as Robo-Signing - tied to the foreclosure process that may create title issues in the future for new owners. 
The biggest obstacle buyers and sellers face in completing a shortsale is the amount of time and paperwork necessary to complete a transaction given all of the requirements of the banks.
The federal government has instituted measures to accelerate the process but the results have been mixed, industry watchers said. 
In South Florida, the average shortsale was on the market in 2010 for 195 days before selling. Last year's figure is down from an average of 203 days in 2009. 
Compare this to bank-owned properties that were on the market in 2010 for an average of 44 days, down from 64 days in 2009. 
The overall average for all South Florida residential resales in 2010 was 121 days, down from 129 days in 2009. 
"Lenders have reduced the shortsale approval time," Osorio said. "It is still not quick but it is faster. We expect the average amount of time necessary for a shortsale to transact to get short and shorter as the lenders embrace the approach." 
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