The real estate market used to lead the economy out of recession. Not this time. The busted property bubble — which has ravaged South Florida worse than all but a few other locations — has plunged the nation into an economic slide not seen in 50 years.
Amid a deep recession that experts fear could morph into a depression, everyone in real estate is searching for answers.
As government gropes for policy solutions, from banker bailouts to lower interest rates, some brokers believe short sales will save the real estate market. Lenders are so beleaguered, they say, that they’ll take what they can get in property sales, even if the price is less than their loan.
Others believe the natural foreclosure process should be allowed to run its course. Still others believe auctions are the fastest way out of the biggest real estate mess of the 21st century.
No single course will get the market to recover, but everyone wants recovery. Foreclosures rose 81 percent in 2008 from the previous year. Those numbers are likely to climb in 2009 as the next wave ensues — and few players will take a laissez-fare approach and do nothing.
“For most, recent legislation is simply delaying the inevitable. The truth is that moratoria on foreclosures aren’t going to help get real estate-owned [foreclosed] properties off of lenders’ books,” said Travis Olsen, CEO of National Short Sale Center in Scottsdale, Ariz. “Not even loan modifications seem to be helping. Half of all loan mods lead to redefault, which wasn’t even a word until recently.”
Olsen believes the fastest route to recovery is cutting inventory to balance supply with demand. Edward Goldfarb, a distressed property expert at Re/MAX in Pembroke Pines, agreed. In fact, he called short sales the “savior” of the real estate market.
“Each short sale will save the banks a minimum $50,000 in needless foreclosure costs, save the property owners’ credit and save America from having to spend $1 trillion of unnecessary bailout money,” Goldfarb said.
Not every broker agrees. Despite forecasts of as many as 2 million foreclosures in 2009, some brokers reject short sales as the solution.
Janice Leis, an associate broker at Prudential Florida WCI Realty in Boca Raton, said young professionals with strong employment contracts and FHA financing don’t have time to wade through a long short sale process to purchase a new home.
“I have always been an advocate of keeping it simple and following a straight line to your destination,” Leis said. “A foreclosure has one seller — the bank. They own the property, make a decision as to the best contract terms and conditions and close with a clear title.”
If short sales aren’t the answer, then how can the market shake itself out so prices can reset to what the market will bear? Part of the answer could come from the Internet. Condo.com and Ameribid just launched a partnership that relies on online auctions to set the prices and sell off huge amounts of inventory.