Short Sales: Bad for Business?

October 2, 2008

short-sales2In the October 2008 edition of “Florida Realtor” a Realtor wrote a letter to the editor complaining that short sales are basically bad for business. Home sellers that are not in a short sale or foreclosure situation cannot compete with the extremely low prices offered by short sales and bank owned properties.

While this is true I have the reverse opinion. Short sales and foreclosures are helping thin out a saturated market. Granted, it is going to take quite a while to sell all of these short sale and REO (bank owned) homes, but they DO need to be sold if we’re ever going to get out of this economic crisis. The lower the list price the quicker the sale. The quicker the sale the faster we can clear the market of these under priced homes and start seeing traditional sellers have a chance of selling. Because right now…you and I don’t stand a chance of selling our homes. We have to wait it out and let the short sales clear the market. And it’s going to be a long and painful process so don’t hold your breath. As the current short sales sell new ones will enter the market.

An elementary understanding of economics tells us that price (or the equilibrium point of supply and demand) cannot increase (thus making traditional equity-holding sellers happy) without a decrease in supply. So short sales selling are facilitating a decrease in supply. Short sales are a good thing. We should all celebrate every time a short sale closes in our neighborhoods, because this short sale is moving us one step closer to a normalized market. There IS a light at the end of the tunnel. Hopefully, that light isn’t a train.

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