New Federal guidelines on short sales are likely to have a beneficial impact on the metropolitan Chicago real estate market, according Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network.
The delays that have been typical of short sale transactions have made some buyers reluctant to consider homes that would involve that type of transaction, according to Merrion. Short sales occur when a lender accepts the sale of a home at a price less than the actual amount owed on the mortgage. Homeowners eager to avoid foreclosure often try to complete a short sale of their property.
”As a result, those offering their homes as short sales have found it takes much longer to secure a buyer and then even longer to actually close the sale. That has made it harder to get short sale properties off the market and into the hands of a new owner,” said Merrion.
Illinois posted the third-highest state total of homes receiving foreclosure filings in October, according to RealtyTrac. Filings were reported on 19,946 properties-the highest monthly total for Illinois since January 2005 and up 57 percent from a year earlier and up 56 percent from September. One in every 263 homes in Illinois received a filing.
In the Chicago market, filings were reported on 11,494 homes in Cook County, where the number jumped 67 percent from a year earlier and spiked 131 percent from September. In the Chicago metropolitan area, filings were reported on 18,541 properties, up 63 percent from a year earlier and up 72 percent from September. Foreclosures accounted for 29.7 percent of sales in the seven-county Chicago metro area, but short sales represented only 8.3 percent of home sales.
During October, the average market time needed to sell a foreclosed home in Chicago was 117 days, while Chicago homes offered as short sales spent 245 days on the market before going under contract.
In DuPage County, foreclosures were on the market an average of 157 days, short sales for 248 days. The comparable figures for Lake County were 124 days for foreclosures and 246 days for short sales.
The new guidelines are likely are likely to increase dramatically the number of short sale transactions in number, reducing the number of foreclosures in the market, Merrion said.
“Short sales are absolutely critical as more and more people continue to face foreclosure and as our housing market struggles to recover,” said Dave Liniger, chairman and co-founder of RE/MAX International, who traveled to Washington, D.C., frequently during the last year urging action to facilitate short sales.
‘While not all of our recommended changes were implemented, the Treasury’s new guidelines go a long way in incentivizing both lenders and homeowners to work together to keep homes from falling into foreclosure,” Liniger said. He said believes a streamlined short sale process would help many families avoid the trauma of foreclosure and help the housing market remain on the road to recovery.