More Signs of a Strengthening Market

The residential real estate market in the greater Tampa area is continuing to strengthen, a positive trend that began about four months ago.  In fact, some of the latest signs of this trend can be seen in the short sale arena.

In most any market, following the laws of supply and demand, a sale does not occur until we have both a willing seller and a willing buyer.  In short sales, however, a willing buyer and seller are not enough.  For a short sale to proceed, the seller’s bank must approve the deal after the buyer and seller have agreed to the terms.  Let me describe a recent sale to illustrate my point.

After the house had been on the market for 6 months with another company, the seller approached us and asked if we could help.  The short sale situation was pretty clear – the seller’s income had gone down significantly, he could no longer afford the house, and he was behind on his mortgage payments.  The value of the house had declined with the market, making it impossible to sell the house for a price that would cover the mortgage payoff.  We listed the house for sale and immediately began working with the lender on a short sale.

That spring we got a good offer from an interested buyer and put a deal together for the bank.  Not one of those “let’s offer $150,000 for a $700,000 house and see what happens” offer, but a good, solid offer, about as good an offer as you could expect for the market conditions.  The buyers were qualified, serious, and the price was good.  The bank said “no,” and refused to even give a counter offer.  The buyers did what most people would do – they bought another house.

The months passed, and the real estate market continued its decline.  That fall another serious buyer came along, with another good offer.  It was $45,000 below the spring offer, but right in line with the current value of the house.  Again, the bank said “no.”

By the next spring, the bank had not received a single mortgage payment in over 19 months.  The third offer came around that time, but this one was a real low-ball.  This time the bank made a good decision when they said “no.”  A short time later, the fourth offer came in, exactly $100,000 below the first offer from last spring, and the bank finally took the deal.

We could talk about the wisdom of the bank clerk 3000 miles away that made the decisions to hold on to the house during the entire price decline, and then sell only after prices stabilized, and we could talk about how badly the banks needed our bailout money, but this story is not about one house.  It’s about the market in general.  More and more, banks are finally letting go of their short sales and foreclosures, clearing out one of the final obstacles to recovery.

The vacant house gets painted, cleaned, lived-in, and cared-for again.  Flowers get planted, furniture gets purchased, and people get invited over, buying a bottle of wine as a gift on their way over.  One by one, in neighborhoods and cities across the country, that’s what pushes the economy back to recovery.