Short sales have dwindled in Orlando during recent years, and yet the region had a greater share of the bargain-priced sales during the third quarter than almost any U.S. city, a new study shows.
Known ironically for taking a long time to complete, short sales are bank-approved home sales with prices less than the outstanding mortgage.
More than one in every 10 home sales in the four-county metropolitan area during the third quarter was a short sale, according to a report released Tuesday by real-estate-research company RealtyTrac. Only Las Vegas, Lakeland and Fort Myers had higher rates than Orlando’s in the report on the top 100 U.S. metro areas.
The math on short sales has shifted in recent years almost as much as Central Florida’s real-estate market. Median prices in the core Orlando area have increased from less than $100,000 three years ago to almost $170,000 last month. The view of short sales has changed with it.
“Banks used to accept an offer on a short sale,” said Charles Rutenberg Realty Broker James Batenchuk, whose company has handled more than 2,300 sales so far this year. “Now banks are rejecting offers on short sales because they know that, if the house goes to foreclosure, they can still sell it for prices closer to market value.”
Orlando’s rate of short sales is high by national standards, but they no longer define the Central Florida housing market as they did in the past. During the summer months, 10 percent of Orlando home sales were short sales, which is down from 12 percent in the second quarter and from 17 percent in the third quarter last year, according to RealtyTrac.
Central Florida’s continued national distinction for short sales is a reflection of how deeply depressed the region’s housing market was just three or four years ago, Batenchuk said. At that time, more short sales and foreclosures sold than traditional sales.
It’s taking years to flush those distressed properties out of the pipeline. As market conditions have improved, more homeowners can sell their homes for a profit. And owners of underwater houses may be more willing to hang on to their homes instead of selling them for a loss.
For deeply underwater buyers at risk of losing their home in a foreclosure, the short-sale alternative is preferred because it does less damage to their credit. Also, they can walk away with less debt than the legal costs, fines and fees associated with a foreclosure.
Whether short sales are still the deal they once were is debatable. In September, the median price for short sales in the core Orlando market was $137,500 — about $30,000 less than the midpoint home price overall in the market, according to Orlando Regional Realtors Association.
“Buyers are still interested in purchasing short-sale homes,” said Mike Stewart, founder of Southern Realty Group LLC. “However, pricing seems to be more in line with the current market values, providing less of an incentive.”
Banks, he added, have found a new way to smooth out what was once a notoriously long process that could take a year to complete. For instance, lenders now sometimes offer a small relocation incentive to short sellers who leave their home in a timely manner, Stewart said.
Matthew White, broker associate for Sloane Realty LLC, said short sales are still a bargain.
“Buyers no longer have the option to purchase a foreclosure for 70 percent to 80 percent of the actual market value, as they once could,” White said Tuesday. “That leaves short sales as the bargain of the month.”
Even though short sales can now take less than three months, they can still be messy, White added.
“Many buyers that need a place for their family to live cannot wait indefinitely for a short sale to maybe or maybe not be approved,” the Orlando sales agent said. “Many real-estate agents do not know how to — or simply choose not to — deal with short sales due to lack of office support staff.”
And with fewer buyers and real-estate agents willing to tolerate the complications of short sales, buyers don’t have to compete with as many offers, White added.
mshanklin@tribune.com or 407-420-5538
