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Equator Rep Expects Short Sales To Rise in 2011

The Home Affordable Foreclosure Alternatives (HAFA) Program may have revamped the short sale market in 2010, but 2011 may prove to be even stronger, according to John Vella of real estate software provider Equator.

Vella, the company’s chief operating officer, says the market for short sales is better than it had been throughout 2010, as poor economic conditions give lenders more pressure to do short sales in the coming months.

According to Vella, as many as 20% of today’s mortgage borrowers are underwater, meaning they owe more on their homes than its market value. Approximately 1.5 million foreclosures are also expected to take place this year.

Vella added that short sales continue to be more attractive to investors than real estate-owned homes or REOs. REO homes are those that have gone into foreclosure but got no bids at the auction. Investors typically lose 20% to 30% less on short sales than on REOs, Vella explained.

He added that mortgage services have become better at handling short sales, especially those that arose from failed attempts at loan modifications. Agents, technology, and the short sale process itself have also evolved, allowing for better cooperation between the lender, borrower, and realtor.

Lenders will continue to use HAFA for short sales, but will simply revert to their in-house programs when the government program doesn’t work for a particular borrower. With proper staffing and continued use of available technology, Vella said, at least 25% more short sales can be completed in 2011 compared to the previous year.