‘Short sale’ house sales rising in Northeast Ohio

Associated Press

CLEVELAND

The real-estate transactions known as short sales are on the rise in Northeast Ohio where analysts call them the lesser of two evils compared to foreclosure.

Short sales, in which a mortgage-holder agrees to accept less than the unpaid balance on a loan, accounted for nearly 6 percent of all home sales in September, according to real-estate research firm CoreLogic.

That’s up from barely 2 percent of sales four years ago in the market, which includes Cuyahoga, Geauga, Lake, Lorain and Medina counties. They’re on the increase nationally as well, with short sales accounting for nearly 8 percent of all transactions in September.

“If you’ve got a neighborhood with five foreclosures, versus five short sales, wouldn’t you rather have the short sales?” said Tammy Frazier, incoming president of the Medina County Board of Realtors. “This is the best of the worst-case situations. All day long, I’d rather have a whole neighborhood of short sales.”

Economists and real- estate professionals such as Frazier say short sales can reduce the number of vacant houses and keep homeowners out of foreclosure. Generally they also can provide mortgage-holders more of a return, though not the entire amount owed.

CoreLogic data shows that the average sale price for a short sale in the Cleveland metro area was about 91 percent of the average price of a previously owned home. By contrast the average sale price for a foreclosure was only $54,000 in September.

Short sales can be risky, and often fall through because of the time banks need to process the transactions, the appraisal process and the need to vet short-sale applications to prevent fraud.

Kimberly Deskins and Mike Kriso considered a short sale for their three-bedroom house in suburban North Olmsted that they bought for $128,000 in 2005.

Last spring, a buyer offered $68,000 cash for the house, then withdrew the offer after too much time passed without feedback from the couple’s private-mortgage insurance company. Deskins and Kriso left the house, are renting and now face foreclosure.

A short sale worked for Walt Turner, who bought a house in suburban Lakewood in 1998, thinking he would live there forever. Twelve years later, he is renting a condo in Florida after selling his house for $33,000 less than he owed on the mortgage.

Turner was forced to make the short sale after losing his job at NASA Glenn Research Center in Cleveland. He accepted a job at the Kennedy Space Center but didn’t want to add his empty home to the other vacant properties around it.

“It took a sacrifice on Walt’s part, because a short sale is not good for his financial history,” said Julia Hutchison, who bought the house along with Bobby Breitenstein, with whom she runs a nearby coffee shop. “It didn’t take him long to realize it would probably be the best option. He didn’t want to have the liability anymore.”