Repossessed Homes Short Sales on the Rise in California

Repossessed homes short sales have become a fixture in the four corners of the housing market in Sacramento, California as the method is becoming popular among real estate agents, banks and buyers.

It used to be that real estate agents and banks steered away from short sales because of the method’s complicated process.

Now, banks are starting to embrace short sales as the number of repossessed homes in Sacramento reached 40,000 since 2007. Short sales are real estate deals in which distressed homeowners sell their properties at a price less than the mortgage that they owed.

The method requires the complete cooperation of lenders and banks as they have to agree to accept the price that the distressed property will fetch on the market as settlement for the homeowner’s debt. Banks opt for short sales as a way to avoid the high costs of foreclosure and to help contain the flood of repossessed homes in the area.

ReMax broker Scott Williams said that almost 50 percent of the real estate inventory is composed of short sales deals. Despite the flood of mortgage defaults, Williams is optimistic that foreclosures would be contained by short sales and would keep the flow repo houses to a manageable level.

According to industry analysts, almost 50 percent of for-sale houses in the counties of El Dorado, Sacramento, Yolo, Yuba, Placer and Sutter are not bank repossessions but short sales.

Short sales deals are prevalent in suburban areas. Short sales accounted for 56 percent of houses in Lincoln that are priced from $200,000 to $25,000, 55 percent in Rancho Cordova for properties priced from $200,000 to $300,00, 46 percent of houses in Folsom and 44 percent in Elk Grove for houses priced in the range of $300,000 to $325,000.

Meanwhile, Williams said that one out of four pending sales is short sales approved by banks, representing one in seven deals.

By comparison, bank repossessions accounted for about 60 percent of sales in the area in 2009. However, sales of bank repossessed homes are starting to drop as the market share of short sales rises.

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