Short Sale Transactions Declining

There was a time when REO and short sale transactions dominated the market in and around Fort Lauderdale.  A time not so long ago.  I comb through the days new listings every night.  I've been noticing that new short sale listings are almost non existent.  Is it because we've worked through enough of the distressed inventory that fewer people need to short sale?  Is it because few agents want to list, or deal with a short sale transaction?  Or is it this nasty little tax consequence short sales now have?  I believe the answer lies between all three reasons.

I drew out an area that stretches from Commercial Boulevard, down to route 595.  Then I used route 95 as the western edge, and the ocean as my eastern edge.  I ran a search for single family, closed sale transactions.  Between the period of January 1, 2013 and April 1, 2013 there were 64 closed sale transactions that were short sales.  Between the period of January 1, 2014 and April 1, 2014 there were 30 close sale transactions that were short sales.  That's a drop off in excess of 50%!  So the data is clear, short sale transactions in Fort Lauderdale are in steep decline.

Have we worked through enough of the distressed inventory?  In the tri county area most statistics I find say roughly 15% of the existing 1st lien position mortgages are delinquent.  That's down from a high of roughly 25% during the housing market crash.  I would conclude that part of the reason we're seeing fewer short sale transactions is simply due to less overall distressed real estate on the books.  Additionally, rising housing values took a number of people out of the red and put them into a position to sell.

Home sellers, home buyers, and real estate agents alike became completely disenfranchised over the short sale process.  Dealing with banks was, at times, completely maddening.  It became such a frustrating process that agents, and buyers, just began ignoring short sale listings.   I absolutely believe the frustration with the process is one reason we're seeing fewer closed short sale transactions.

Here's the real change from last year to this year, the tax consequence of a short sale.  When the housing market crashed legislation was quickly passed which erased tax consequences for sellers in a short sale transaction.  That legislation expired this year.  As it stands now you're taxed on the difference between what your property sells for, and what you owe on a mortgage, in a short sale.  So if you owe $200,000 and short sale for $100,000, you're taxed on the $100,000 difference as if you received it as income.  The result is sellers getting to a closing table, and being told they now have a huge tax bill.  It's becoming fairly routine for the seller to just walk away from the closing.  The cost of short selling is outweighing the benefit of doing so.

I'm not a CPA, I am not giving you any type of tax advice if you are a seller considering a short sale.  You should speak with a qualified tax professional prior to making a decision about selling your home.

Subscribe to this blog

I work as a Realtor in Southeast Fort Lauderdale. If you’re interested in buying or selling a home, condominium, or townhouse (townhome) in: Rio Vista, Victoria Park, Downtown Fort Lauderdale, Fort Lauderdale Beach, Sailboat Bend, Tarpon River, Croissant Park, Collee Hammock, Wilton Manors, Poinsettia Heights, Coral Ridge, or Las Olas Isles, please feel free to contact me at (786)443-7203 or through my email caseyprindle@gmail.com. I am a Realtor that works on Saturdays in order to accommodate those with busy schedules.

Veniceofamericahomes.com is a trusted source for real estate trends, statistics, and data, as well as aesthetics.

Written By Casey Prindle