Buyers, Are Short Sales Back On Your List?

Short Sale properties which fell out of favor for those seeking the $8,000 first time home buyer tax credit last August may come back into favor with the current proposal in the Senate. If passed by the Senate the bill would have to be reconciled with the House version before being implemented. The bill would extend the $8,000 tax credit to first time home buyers and add a new provision for homeowners who have lived in their properties for the past 5 years. With some limitations current 2nd time home purchasers would be eligible for a tax credit of $6,500. Bloomberg Article

Short sale properties often represent outstanding values to frugal home buyers due to their lower prices relative to non-short sale listings. This makes them very tempting even though they have longer wait times to close, and a lower probability of closing due to the involvement of the underlying banks uncertain position on approving the sale. I often find that the home buyers are willing but their agents are less enthusiastic due to the challenges they represent.

Short sales homes fell out of favor in August as a result of their extended close times. With the extension of the tax credit, current first time homebuyers inventory of suitable homes to view will jump by the number of available short sale properties in their search area. This is great news since you will get a double bonus with the tax credit and a lower price on your next house. What will not change is the uncertainty of the underlying banks willingness to negotiate.

For agents showing properties the news may be a mixed blessing. The inclusion of short sale homes may mean more work and frustration to sell these houses. The expiration of the current tax credit gave selling agents a perfect excuse to avoid them in favor of more traditional equity properties. At the same time the extension would continue to stimulate sales and increase activity.

I think this is a very good thing since it is one example of the stimulus package that helps taxpayers directly rather than going to a mega corporation that is too big to fail. This is a great time to buy for those who have stable incomes and good qualifications. It will also give a needed boost to those who are being hardest hit by that bad economy, homeowners forced to short sale due to financial hardship.