Top 10 Short Sale Markets

Residential  short selling is rising rapidly in some of the nation’s largest metropolitan  areas. U.S. banks are finally approving more short sales to pre-emptively  jettison sketchy mortgage loans off their troubled balance sheets — while  avoiding the increasing cost and complications involved with selling bank-owned  properties. This shift means bigger discounts and faster short sales  transactions in some markets.

If you’re in the market today for a home, you’re almost  guaranteed to be looking at distressed properties, including short sales.  Nationwide, nearly one-third of all U.S. homes sold in the second quarter of  2011 were in some stage of foreclosure, with short sales accounting for 12  percent of all residential real estate sales, according to RealtyTrac  data. A total of 102,407 short sales were sold to third party buyers from  April to June 2011, up 19 percent from the 86,059 short sales sold in the first  quarter of 2011.

And more are expected: In Nevada, 60 percent of the  properties with a mortgage are worth at least 25 percent less than the  outstanding mortgage, while 44 percent in Arizona and 46 percent in Florida are  underwater, according to RealtyTrac. In Michigan, 58 percent of borrowers are  underwater, while 27 percent of Californian borrowers are drowning in negative  equity. As many of these underwater buyers decide to sell — or are forced to  sell by some unfortunate circumstance — a short sale will be their primary  option.

Based on an analysis of RealtyTrac data, including average  sales price, average discount, percent of all sales and the average days to  sell a short sale, Foreclosure News  Report compiled the following list of the Top 10 metropolitan statistical  areas (MSAs) for buying a short sale..

1) LOS ANGELES

RealtyTrac  data shows that properties sold via short sale in the second quarter took an  average of 192 days to sell from the date they entered the foreclosure process,  compared to an average of 186 days to sell an REO property from the time it was  repossessed by the lender.

The  Los Angeles-Long Beach-Santa Ana metro area had more short sales than any other  metro in the nation during the second quarter, registering 9,145 short sales in  Q2 2011. Buyers saved 32 percent on their short sale transactions. The average  price of a Los Angeles short sale was $350,237.

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2) PHOENIX

With short sales accounting for nearly a quarter of all  sales, Phoenix buyers had no shortage of pre-foreclosures bargains to choose  from. In the second quarter of 2011, Phoenix buyers negotiated 8,434 short sale  transactions, paying an average $133,793, with an average discount of 27  percent.

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3) CAPE CORAL-FORT  MYERS, FL

During the housing boom, homebuilding was on steroids in  Southwestern Florida, dredging hundreds of miles of swampy canals into a  modern-day Venice on the Gulf of Mexico. At Lehigh Acres, a team of admen  transformed a sprawling ranch east of Fort Myers into a new formula in  mass-marketing real estate.

But that addiction to overbuilding and overpricing has left  thousands of prospective sellers seriously underwater.

Cape Coral clocked in with 1,358 short sales in the second  quarter of 2011, with an average price of $111,029. Buyers in Cape Coral paid 33  percent less for pre-foreclosure (short) sales than the average price for  properties not in foreclosure.

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4) OXNARD-THOUSAND  OAKS-VENTURA, CA

Two  thousand miles away from Cape Coral, Fla., another coastal city in California  has emerged as a short sale pioneer. Oxnard is among the metros most battered  by the housing slump.

For  short sale buyers, there are bargains galore in Ventura County. The Oxnard-Thousand  Oaks-Ventura, CA metro had 681 short sales in the second quarter of 2011. Prices  were slashed 24 percent on short sales, with the average price at $352,994  according to RealtyTrac.  Short sales accounted for 26 percent of all real estate transactions.

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5) RENO-SPARKS,  NV

About 60 percent of homeowners in Reno owe more on their  house than the house is worth, making the short sale market in Reno is huge.

Pre-foreclosure  sales alone accounted for nearly 30 percent of all sales in the second quarter  of 2011, according to RealtyTrac. Buyers paid only $156,664 on average for a Reno  short sale (less than it costs to build a new house), and the 702 short sales  in Reno during the second quarter represented a 50 percent increase from the previous quarter.

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6) SAN FRANCISCO

Short  sales in the San Francisco metro rose 47 percent from the first quarter to the  second quarter to a total of 3,237. Buyers snagged an average discount of 41  percent on pre-foreclosures, although the average price for a short sale was  still a lofty $364,766.

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7) SAN JOSE

Once considered a safe alternative to the overheated Bay  Area real estate market, the San Jose metro — home to the Silicon Valley — has  no shortage of short sale inventory.

The East Bay area of Northern California offers homebuyers  and investors big discounts on short sales, averaging a whopping 41 percent  savings. Despite the big discount, the average short sale price of $420,806 in  the San Jose area was still one of the highest in the country.

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8) PORTLAND MSA

Portland, a metropolitan area of some 2.2 million people, is  a spring board to the drizzly Pacific Northwest. The area reported a total of  756 pre-foreclosure (short) sales in the second quarter, up 39 percent from the  previous quarter and accounting for 11 percent of all sales.

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9) ATLANTA

Atlanta was another metro at the top of the short sale list for  the second quarter, with a 21 percent bump in pre-foreclosure sales from the  prior quarter. In the metro Atlanta area, 2,595 short sales were sold to third  party buyers in in the second quarter, accounting for 14 percent of all sales.

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10) MILWAUKEE

Rounding out the Top 10 was the Milwaukee-Waukesha-West  Allis metro, where 324 short sales took place between April and the end of June  2011 — up 20 percent from the previous quarter. The average price for a short  sale was $107,980, 41 percent below the average price of a property not in  foreclosure.

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This article was  excerpted from the October issue of the Foreclosure News Report, an award-winning monthly newsletter  focusing on the foreclosure market. Get a free  trial issue.

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