There’s been a lot of buzz about the current housing recovery in Orlando, many real estate agents feel that these developments mean the end of Orlando short sales. Speaking as a realtor that specializes in doing short sales, I completely disagree with that, and I’ll tell you why:
Has The Orlando Real Estate Market Fully Recovered?
It’s true that we are now facing a housing market that’s less heated and moving towards normalcy. Home price increases are driven by market demand as well as inventory shortages. And as far as pricing goes, according to CoreLogic, there was a nearly 12% growth in 2013. However, halfway through 2014, we’re already experiencing a cooling trend overall in Orlando with lower-priced properties in the lead with just 2% growth. All these things can be attributed to rising interest rates, a drop in investor participation, ever-changing short sale rules, as well as increased inventory.
Any active real estate agent can tell you that decreased inventory will lead to higher prices. Then when housing prices increase, it gets people feeling good about the market again which helps to convince homeowners that were on the fence about selling, to put their house back on the market. However, while price increases are encouraging, we still have a long way to get to erasing equity losses from the last decade.
In my opinion, the restart of any housing market is directly related to inventory and that’s why I feel that the current rebirth of the Orlando real estate market is an illusion. If you haven’t heard the term “shadow inventory”, it basically means real estate inventory that’s not yet reflected on the market.
There are several reasons why shadow inventory exists. Here are the most common:
Loan modifications- This is a foreclosure workout program that’s designed to modify the terms of the loan making it more affordable to the homeowner
Homeowners in litigation- These homeowners are in actively litigating foreclosures with their lenders causing the property to be tied up for up to several years in some cases.
Short Sales that have fallen short- Those people that have just given up trying to short sale their home because of an incompetent agent that couldn’t get the job done or a lender that just won’t budge.
Foreclosed properties- This is when a property has gone to foreclosure and taken back by the lender. I believe that this is the biggest reason for shadow inventory. When the lenders take back these properties it can sometimes take up to several years for the property to be put back on the market. Once it’s put back on the market for sale, it’s then considered an REO [real estate owned] property.
Unrealistic Property Values Not Helping Things
Another major factor that affects housing recovery is the perception of property values. Dealing with hundreds of BPO agents and appraisers [sometimes known as Deal Killers”] I know how much someone’s price opinion can vary from someone Else’s. It’s not uncommon to find very high and very low comps for most properties. This can be problematic because, with a short sale side, buyers will always try to use the lowest comps to justify buying a distressed property. Unfortunately, in the real estate industry, you just don’t know how things will play out in any transaction which is why you have to be prepared for everything.
Orlando Short Sales Will Be Around For A While
All of the things mentioned previously in this article all play a role in why I think that short sales are here to stay…at least for the next year or two. 91% of our clients are short sale clients and I can truly say that a short sale represents a way out for people, a way to get out of a bad situation and help people to move on with their lives. I also believe that lenders will start to wake up and smell the coffee when it comes to short sales vs foreclosure. Lenders benefit far more from a short sale as opposed to spending valuable time and money on a foreclosure. By allowing more homeowners to short sell their homes, they won’t have to deal with the hassle of getting the property back on the market and hoping to recoup a portion of their money.
