Short Sales to Rescue Move-Up Buyers?

An article in USA Today from February 10th 2010, highlighted a growing problem – one plunging the real estate market deeper and deeper into the abyss… the plight of the move-up buyer.

A large part of any booming real estate market is the move-up buyer. Sure, first time buyers are important, as are downsizing empty nesters. But move-up buyers account for possibly the largest segment of the real estate market. After all, the average American only stays in their home for about 7 1/2 years.

So what happens when an overwhelming number of potential move-up buyers can’t move-up because their homes are underwater?

Well, they could do what many do and mail in the keys. Naturally, a foreclosure on their credit report won’t allow for them to buy again anytime soon, but they’ll likely be able to rent and likely, for more space and for less than what they’re current mortgage is. I think we’ll see a lot of former homeowners become permanent renters going forward. But, renting isn’t for everyone. Additionally, a recovering market needs more buyers, not renters.

Another option would be to pay off the difference between what is currently owed, and whatever offer you’re able to get. Realistically though, how many people have that kind of money to spend right now? Not many.

Which brings us to short sales. By negotiating a short sale while still remaining current (yes, that is possible), that a seller can purchase again immediately. If you have a 60-90 late on your credit report, a wait of 18-24 months is more likely.

Of course, the best fix would be principle reductions. But until that happens, a short sale might be the best way to move-up…