The number of short sales in Snohomish County jumped to 19 percent of all sales in 2012 from 14 percent in 2011, according to a new report released Tuesday by Washington Property Solutions, a short-sale negotiating firm.
While short sales were up, the number of bank-owned residential property sales fell to 21 percent from 34 percent of all sales over the same period, according to the Washington Property Solutions 2012 Annual Short Sale Statistics Report.
Short sales represented 23 percent of all closed residential transactions in Snohomish County in the fourth quarter of 2012, the Washington Property Solutions report indicated. The percentage of short sales has been rising steadily in the county since the third quarter of 2011, when they represented 13 percent of closed sales.
“That’s a lot,” Natalee Thurston, an agent with Windermere JS in Marysville, said of the fourth-quarter short-sale figures. “That’s huge.”
Short sales occur when lenders agree to sales prices that fall short of what’s owed on the property.
The increase in short sales has been driven largely by major shifts in the way lenders are handling distressed properties to avoid foreclosure, said Richard Eastern, CEO of Washington Property Solutions, whose agents work with Windermere Real Estate/East Inc. in Bellevue. Those changes include:
•Cash incentives to short-sale sellers of up to $35,000 at closing. Chase and Bank of America have started paying incentives to encourage sellers to do a short sale and avoid foreclosure. The checks can be used by the homeowner without restrictions.
Making financing easier for those who want to buy short-sales properties.
Significantly shortening the time lenders take to initiate foreclosure.
Eastern said the shortened foreclosure timeline has created a new sense of urgency among homeowners who are underwater to make a sales decision.
“A year ago, homeowners who were delinquent on their mortgages just postponed a decision, knowing banks were taking nine months or more before starting foreclosure proceedings,” Eastern said. “Now banks are moving much faster with their foreclosure process.”
Thurston said she noticed a glut of bank-owned and Fannie Mae properties hit the market soon after the November election. Most of those were trustee’s sales advertised in The Daily Herald’s legal notices, and many of the foreclosed properties she now sees advertised had long been vacant as banks held them.
Thurston predicts a sharp jump in the number of bank-owned home sales for 2013, based on her own observations.
Worry over the extension of Mortgage Forgiveness Debt Relief Act provided an additional push to homeowners considering a short sale in 2012, Eastern said. Uncertainty over the future of the act continues to propel the short-sale market.
“With Congress battling over the budget, consumers have gotten the message that if they don’t do a short sale before the end of 2013, they may be hit with a substantial tax bill,” Eastern said.
As part of the budget resolution, Congress extended the Mortgage Forgiveness Debt Relief Act through Dec. 31, 2013. The extension prevents homeowners who go through a short sale from being taxed on the forgiven amount of their mortgage debt. Federal tax rules normally count forgiven debt as taxable income.
Kurt Batdorf: 425-339-3102; firstname.lastname@example.org.