Short sales. Foreclosures. The media will tell you how bad it is.

I’ll tell you, this is a market of opportunity.

But if you are going to take advantage of this opportunity, you need to understand the pros and cons of short sales.

Why? Because short sales are becoming an increasing proportion of the market.

Why? Because the market is turning around.

Sound counter intuitive? It is, I agree.

The number of short sales has increased as a portion of the entire market because the number of foreclosed properties is shrinking.

With the number of foreclosures drastically shrinking in the Phoenix real estate market and the rapid increase of short sales, those looking to buy will be forced to wait unless they decide TODAY to buy (not literally today, but in the near, and I mean very near, future).

Check out the graphs, below. In the first one you can see those two pies. Notice that the one of the left represents active listings. See the light blue area? Those are “pre-foreclosures” or “short sales.” The red area is lender owned property and the dark blue represents normal sales.

So, look at the right hand pie. These are monthly sales –those that actually close. The red area is much larger because the foreclosed properties actually close.

With the increased number of short sales on the market, a homebuyer waits an average of 3-6 months before closing the deal, and only 40% of transactions actually close.

So, what is the trade off? Not much, really. You can see the bar graph below the pies showing that prices for foreclosed homes are lower than short sales. Problem: there are fewer of them to look at.

Am I saying not to even look at short sales? Nope. Just know what the risks are. If you need to close in a hurry, don’t look at short sales. If you have a longer time horizon, then this can be a great way to find some incredible deals.

Check out the graph further below to see how the number of short sales versus foreclosed properties has changed over the course of the year.

Then give me a call and let’s talk about how I can help you.