by Sherry Davidson, President, Davidson Realty Inc.
Brought to you by the Builder Realtor Relations Committee of the Sales and Marketing Council of the Northeast Florida Builders Association and LENNAR
(Q.) How does a short sale affect the value of properties in that community?
(A.) Everyone agrees that a short sale reduces values in a community. The Treasury Department estimates that a foreclosure reduces values of surrounding properties by about 9%. I haven’t seen a statistic for short sales but a short sale is much better for the neighborhood because many times a homeowner stays in the home with a short sale. Usually a new owner will occupy the house sooner in a short sale and begin maintaining the home. The lenders collect on average about 60% of their loan with a short sale and about 30% in a foreclosure so even though the values are negatively affected with a short sale. It is much worse with a foreclosure.
(Q.) How long does it typically take to close a short sale?
(A.) It is completely dependent on which lender has the loans on the home. We had one short sale submitted around 9:30 and we had an approval around 12:00 the same day. This is very unusual. We have a short sale with one lender that we have been waiting 7 months and we do not have an approval. The average time we are seeing is about 3 months to close a short sale.
(Q.) What are the benefits of a short sale? What are the benefits of new construction?
(A.) The benefit of a short sale is the buyer can get a great value on a home in some cases if they have the time and patience to work through the process. The short sale may be in a more established neighborhood than some of the new homes.
There are lots of benefits of new construction. Many buyers love having a brand new home. There is the opportunity to get exactly the home you want and select the finishes you prefer. The new homes are built to the new building code which should be a more efficient home. Most new homes come with a builder warranty which is very comforting to a homeowner.
(Q.) How can builders compete against short sales without alienating the Realtor community?
(A.) With most buyers we see, the bottom line is pricing. If they can get into a new home for a similar price to a short sale, they will choose a new home. Some builders have been very successful with incentives especially paying CDD fees for some period of time. Even though about half of our business has been distressed properties, all of the Realtors in our office love the opportunity to sell a new home rather than a short sale.
(Q.) Are you seeing a decrease in short sales?
(A.) We are not seeing a decrease in short sale transactions right now. Some experts are predicting that there may be fewer foreclosures and more short sales in the coming months because of the HAFA legislation and the Government encouraging lenders to offer alternatives to foreclosure. I am encouraged that the HAFA program which took effect April 5th, may improve the short sale process. HAFA stands for Home Affordable Foreclosure Alternatives.
Sherry Davidson has been married to her husband and business partner Jim for 30 years. He has also been in real estate for over 30 years. Jim was with Arvida for 8 years. He began working on the World Golf Village in 1987. The Davidson’s opened the Village in 1998. They have had Davidson Development and Davidson Realty since 1989 and celebrated their companys 20 year anniversary in 2009.