NAR Buyer and Seller Survey Shows Value of Long-Term Home Ownership

RISMEDIA, November 9, 2010—Home buyers today have affirmed a long-term view of home ownership, the typical seller is experiencing positive returns and the vast majority of home owners see their property as a good investment, according to the latest consumer survey of home buyers and sellers. The study was released at the 2010 Realtors Conference & Expo.

The 2010 National Association of Realtors Profile of Home Buyers and Sellers is the latest in a series of large national NAR surveys evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers.

Although typical sellers had been in their previous home for eight years, up from seven years in the 2009 study, first-time buyers plan to stay for 10 years and repeat buyers plan to hold their property for 15 years.

NAR 2010 President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said the pattern of home buyers taking a long-term view has solidified over the past few years. “This underscores two simple facts—home ownership encourages stability, and the longer you own, the better your investment.”

Even with several years of price declines, the typical seller who purchased a home eight years ago experienced a median equity gain of $33,000, a 24% increase, while sellers who were in their homes for 11-15 years saw a median gain of 40%.

“Sellers who purchased at the top of the market and had to sell in a short time frame were hurt by the price correction, but the vast majority who are able to stay for a normal period of home ownership generally built enough equity to make a trade-up purchase,” Golder said. “Despite swings in the housing market in recent years, the fact is most long-term owners see healthy gains in the value of their property.”

House flipping is virtually nonexistent in today’s market. “The primary exception is for experienced investors, many of whom pay cash and are making renovations or improvements after a careful study of properties, neighborhoods and market demand,” Golder explained. “The house flipping and quick gains which occurred during the boom period were abnormal, driven by risky, easy-money financing that should never have been allowed in the market.”

In the 2006 study, covering sellers during the close of the housing boom, 6% of sellers had owned their property for less than a year and a total of 30% had owned for three years or less. In the 2010 study, only 3% had owned their home for less than a year and a total of 11% had owned for three years or less.

Paul Bishop, NAR vice president of research, said the lion’s share of buyers view their home as a good investment. “Eighty-five percent of recent home buyers see their home as a good investment, and nearly half think that investment is better than stocks,” he said. “Even with the turmoil created by the housing boom and bust, this indicates the long-term view of home ownership as a fundamental goal and value remains sound. In fact, the single biggest reason most people buy a home is the simple desire to own a home of their own, cited by 31% of respondents, including 53% of first-time buyers.”

The next biggest reasons for buying, identified by all home buyers, were desire for a larger home, 9%; a change in family situation and the home buyer tax credit, cited by 8% each; a job-related move, 7%; and the affordability of homes, 6%. Twelve other categories were 5% or less.

The number of first-time home buyers rose to a record high 50% of all home sales from 47% in the 2009 study, building on success of the home buyer tax credit which began in 2009. The previous cyclical high for first-time buyers was 44% in 1991; records date back to 1981.

The profile shows the median age of first-time buyers was 30 and the median income was $59,900. The typical first-time buyer purchased a 1,540 square foot home costing $152,000, with 93% using the first-time buyer tax credit.

First-time buyers who made a downpayment used a variety of sources: 74% used savings, 27% received a gift from a friend or relative, typically from their parents, and 9% received a loan from a relative or friend. Eight percent tapped into a 401k fund, and 6% sold stocks or bonds. Ninety-five percent chose a fixed-rate mortgage.

The shares of entry-level buyers receiving a gift or loan were modestly higher than 2009 when 22% received a gift and 6% a loan from a relative or friend. “It appears more parents were motivated to help their children to take advantage of the home buyer tax credit and very favorable affordability conditions,” Bishop said.

Fifty-six percent of entry level buyers financed their purchase with an FHA loan, while another 7% used the VA loan program. Forty-two percent said financing their first home was more difficult than expected and 9% had been rejected by a lender.

Fifty-eight percent of all buyers are married couples, 20% are single women, 12% single men, 8% unmarried couples and 1% other.

Bishop noted that women buyers have accounted for roughly one out of five transactions since the late 1990s, and single men have been at the one in 10 level since 1981. “A modest increase in the share of single men buyers may result from the home buyer tax credit, but this is the highest share for single men in the history of the study,” he said.

Buyers searched a median of 12 weeks and viewed 12 homes. Fourteen percent of buyers own two or more homes.

The typical repeat buyer was 49 years old, earned $87,000, and purchased a 2,000 square foot home costing $215,000.

The median downpayment of all home buyers was 8%, ranging from 4% for first-time buyers to 14% for repeat buyers.

The median age of home sellers was 49 and their income was $90,000. Sellers moved a median distance of 18 miles and their home was on the market for 8 weeks, down from 10 weeks in the 2009 survey. Half traded up in size, 28% bought a comparably sized home and 21% traded down.

Sixty-four percent of sellers chose their agent based on a referral or had used the same agent in the past. Reputation was the most important factor in choosing an agent, cited by 35% of respondents, followed by trustworthiness at 23%. Eighty-four percent of sellers are likely to use the same agent again or recommend to others.

Forty-four percent of sellers offered incentives to attract buyers, such as home warranties or assistance with closing costs. The typical home sold for 96% of the listing price, compared with 95% in the 2009 profile.

Home buyers thought the most important services agents offer are helping find the right house, and negotiating sales terms and price. Buyers also most commonly choose an agent based on a referral from a friend, neighbor or relative, with trustworthiness and reputation being the most important factors.

Buyers use a wide variety of resources in searching for a home: 89% surf the Internet, 88% use real estate agents, 57% yard signs, 45% attend open houses and 36% look at print or newspaper ads. Although buyers also use other resources, they generally start the search process online and then contact an agent.

When asked where they first learned about the home purchased, 38% of buyers said the Internet; 37% of buyers from a real estate agent; 11% a yard sign or open house; 6% from a friend, neighbor or relative; 4% home builders; 2% a print or newspaper ad; 2% directly from the seller; and less than 1% from a home book or magazine.

Eighty-five percent of home buyers who used the Internet to search for a home purchased through a real estate agent, while 70% of non-Internet users were more likely to purchase directly from a builder or from an owner they already knew in a private transaction.

Local metropolitan multiple listing service websites were the most popular Internet resource, used by 59% of buyers; followed by Realtor.com, 45%; real estate company sites, 43%; real estate agent websites, 42%; other websites with real estate listings, 41%; and for-sale-by-owner sites, 15%; other categories were smaller.

Seventy-seven percent of all buyers purchased a detached single-family home, 9% condo, 8% a townhouse or rowhouse, and 6% some other kind of housing.

Commuting costs continue to factor strongly in buyer decisions, with three-quarters of buyers saying transportation costs were important.

Environmentally friendly features remain a significant factor: 88% of buyers said that heating and cooling costs were important, 71% desired energy efficient appliances, and 69% wanted energy efficient lighting.

Fifty-two percent of all homes purchased were in a suburb or subdivision, 18% were in an urban area, 17% in a small town, 11% in a rural area and 1% in a resort or recreation area. The median distance from the previous residence was 12 miles.

Not surprisingly, for-sale-by-owner transactions reached a record low, accounting for 9% of sales in the 2010 study, down from 11% in 2009. The share of homes sold without professional representation has trended down since reaching a cyclical peak of 18% in 1997. “In a market as challenging as today, it’s clear most home sellers need professional assistance,” Bishop said.

As seen in previous studies, many FSBO properties were not placed on the open market. Factoring out private sales between parties who knew each other in advance such as family or acquaintances, the actual number of homes sold on the open market without professional assistance was a record low 5%—the rest were unrepresented sellers in private transactions. The market share of open-market FSBOs is half of what it was six years ago—10% were sold on the open market in 2004.

The median home price for sellers who used an agent was $199,300 vs. $140,000 for a home sold directly by an owner, but there were important differences. The median income of unassisted sellers was $64,000, in contrast with $93,200 for agent-assisted sellers. Unassisted sellers were much more likely to be selling a somewhat smaller home, and they were more likely to be in a rural area. Combined, these factors suggest a lower value for FSBO properties.

The most difficult tasks reported by unrepresented sellers are getting the right price, preparing and fixing the home for sale, understanding and performing paperwork, and selling within the planned length of time.

NAR mailed an eight-page questionnaire in July 2010 to a national sample of 111,004 home buyers and sellers who purchased their homes between July 2009 and June 2010, according to county records. It generated 8,449 usable responses; the adjusted response rate was 7.9%. All information is characteristic of the 12-month period ending in June 2010 with the exception of income data, which are for 2009. Because of rounding and omissions for space, percentage distributions for some findings may not add up to 100%.

For more information, visit www.realtor.org.

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Designing a Successful Day

All success requires you to make a decision to succeed. Here are five thoughts to consider:

1. Success is more difficult to live with than failure. You must know why you want to succeed so that it has purpose. Otherwise it is a non-fulfilling experience.
2. Success in any endeavor requires you to pay the price. Short-cuts never win you the world-championship.
3. Success is not a one-time thing, it's an all-the-time thing. You never play to lose but every loss teaches you how to play to win.
4. Success is a habit–so is failure.
5. Success is on the inside first before it ever translates to the outside. Feel good about you or you'll never be able to compete.

The quality of your life is in direct proportion to your commitment to excellence.

Based on the above, what's your dream day? If your "success canvas" was without the blight of your current challenges, how would you paint it? How would you answer the following questions:

• What kind of work would you do?
• How would you feel?
• How many hours would you work?
• What time would you start?
• What time would you end?
• How much money would you earn?
• How much money would you save?
• What memories would you create?
• What one-on-one experiences would you have with your spouse?
• How about with your kids?
• How would your attitude be?
• What would be the things you would not do?
• How much more time would that give you?
• How peacefully would you sleep?
• How much inner peace would you have?

These are important questions, the kind of questions that determine your destiny. Highly successful people design their perfect days and they strive to adhere to that agenda. Use the above questions to help you determine if your choices are adding to or taking away from your success.

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GSEs Instruct Servicers to Help Unemployed Through State Programs

Fannie Mae and Freddie Mac have both issued notices to servicers that they must work closely with state housing finance agencies to provide mortgage assistance to homeowners who’ve lost their jobs.

The Treasury Department has awarded $7.6 billion for housing agencies in certain states to develop programs that provide temporary relief to unemployed homeowners.

Effective immediately, GSE servicers are instructed to accept all monthly mortgage payments from housing finance agencies (HFAs) on behalf of borrowers enrolled in state-specific programs for unemployment mortgage assistance or mortgage reinstatement plans.

The directive applies to mortgage loans held in the GSEs’ own portfolio, in a mortgage-backed securities (MBS) pool with the special servicing option, or a shared-risk MBS pool for which the GSEs market the acquired property.

Specific program details vary by HFA, but the assistance provided generally falls under one of two types. An unemployment mortgage assistance program pays portion of or the full monthly mortgage payment amount for qualifying borrowers so that they may seek employment or obtain job training without fear of losing their homes. A mortgage reinstatement program provides a one-time lump sum payment to assist in restoring a delinquent mortgage to current status.

A borrower participating in an HFA program may not simultaneously receive assistance through another loss mitigation program, including the federal government’s Home Affordable Modification Program (HAMP).

Servicers have been instructed that they may not determine borrower eligibility or communicate qualification for a state HFA program to a borrower. Servicers can, however, refer potentially eligible borrowers to the HFA in accordance with relevant state requirements.

The GSEs’ stressed, though, that servicers must not deny or delay consideration of a borrower for a relief or workout option pending approval for HFA mortgage assistance and must not require a borrower to first request financial assistance from an HFA as a condition of consideration for a relief or workout option.

Regarding protocol for foreclosures related to loans that qualify for an HFA program, Servicers are not required to accept mortgage assistance payments if a notice of trustee/sheriff sale has been recorded and is scheduled less than seven days from the date the servicer is notified of borrower approval by the HFA.

If the notice of borrower approval from the HFA is received seven or more days in advance of a scheduled foreclosure sale, Fannie says a servicer still should not suspend the foreclosure proceedings unless it has actually received funds from the HFA to cover the borrower’s mortgage payment.

Freddie stressed that if servicers suspend foreclosure proceedings, they must ensure that appropriate action is taken to re-commence foreclosure proceedings should the borrower’s mortgage payment not be received from the HFA in the month in which it is due.

Fannie Mae noted that it has elected not to participate in any principal reduction options that may be offered by some HFAs. Freddie Mac did not specify in its notice whether principal reduction was an approved means of assistance.

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New York State Banking Department issues report on pre-foreclosure notices

The New York State Banking Department has announced that more than 76,744 pre-foreclosure notices were sent to New York homeowners who have fallen behind on their mortgage payments since May 31, 2010. A total of 134,000 pre-foreclosure notices have been sent since data collection began on February 13, 2010. If a borrower does not become current on their mortgage within 90 days of receiving the notice, the lender then has the right to begin the formal foreclosure process.

The four counties with the highest total number of pre-foreclosure filings on owner-occupied, 1-to-4 family properties were Suffolk County, Queens, Nassau and Brooklyn. These are the same four counties that topped the last report issued on June 10, 2010.

Starting next month, the Banking Department’s online filing system will begin accepting lis pendens information on mortgages that have a pre-foreclosure notice file in the system. A lis pendens is a written notice that a lawsuit has been filed against a property and is the legal beginning of the foreclosure process. The lis pendens data will be included in the Department’s next pre-foreclosure notice report, which will be issued in January 2011.

To read the entire Banking Department press release, click here.

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With Millions of Foreclosures on Horizon, Should States Mandate Mods?

The foreclosure crisis is far from over. According to figures released by the Center for Responsible Lending (CRL), since the crisis took hold, 2.5 million homeowners
have already lost their homes and another 5.7 million are at imminent risk of foreclosure. Looking ahead, the nonprofit research group says it’s projected that between 10 and 13 million foreclosures will have occurred by the time this crisis abates.

The federal government has implemented a mixed bag of foreclosure-prevention programs over the past two years in the hopes of stemming the tide, even incentivizing all parties involved, from lenders and servicers, to investors and the homeowners themselves. But housing analysts, watchdog groups, and industry insiders agree, they’ve yet to hit on a silver bullet solution.

CRL argues that the power to stop unnecessary foreclosures and stabilize local housing markets lies with state legislatures. With exclusive control over their state-specific foreclosure laws, the Center says lawmakers should impose mandatory loss mitigation standards for all servicers prior to foreclosure.

A recent study by the State Foreclosure Prevention Working Group found that “nearly three years into the foreclosure crisis…more than 60 percent of homeowners with seriously delinquent loans are still not involved in any loss mitigation activity.”

In a report written by Sara Weed, a policy attorney at CRL, and Sonia Garrison, a senior researcher for the organization, the Center outlines its proposal for state policymakers to apply “common sense standards to any actor pursuing foreclosure.”

The authors argue state legislatures should mandate that mortgage servicers assess whether foreclosure is in the financial interest of the investor before proceeding to foreclosure.

To be effective, CRL says this mandatory loss mitigation standard should be combined with a requirement that the foreclosing party provide homeowners with a loss mitigation application in tandem with any pre-foreclosure notice or pre-foreclosure communication.

If after the loss mitigation assessment the servicer opts to move forward with foreclosure, the authors recommend states institute a requirement that the foreclosing party

submit an affidavit disclosing their specific reasoning for the denial of a loan modification, including the inputs and outputs of any loss mitigation calculations.

In addition, homeowners should be granted a defense to foreclosure (or equivalent right in non-judicial foreclosure states) based on failure of the foreclosing party to engage in a “good faith review” of foreclosure alternatives, according to CRL.

“The reality is that many of these foreclosures can and should be avoided. All too often, troubled mortgages are sent to foreclosure, driven by a system biased in favor of foreclosure sales over sustainable loan modifications, even when foreclosure is more costly,” the authors wrote.

The report notes that borrowers seeking a loan modification are often told that they have been denied due to “investor restrictions.” However, a recent CRL research report points out that modification is more often than not a win-win for the investor and the borrower.

The Center says in fact, investors themselves often claim that they are not standing in the way of modifications and have voiced concerns that servicers are not acting in their best interest either.

According to the authors of the report, “spillover” costs extend throughout the neighborhood and the larger community. CRL estimates that by 2012, the foreclosure crisis will strip neighboring homeowners of $1.9 trillion as foreclosures drain value from nearby homes, pushing even more borrowers underwater on their mortgage.

Meanwhile, state and local governments continue to be hit hard by declining tax revenues coupled with increased demand for social services, according to CRL. The Urban Institute estimates that a single foreclosure costs $79,443 after aggregating the costs borne by financial institutions, investors, the homeowner, their neighbors, and local governments. But the Center says even this number understates the true cost, since it does not reflect the impact of the foreclosure epidemic on the nation’s economy.

“We cannot afford to wait any longer for the housing market to stabilize itself. If implemented quickly, states can prevent unnecessary foreclosures before it is too late,” authors Weed and Garrison said in the CRL report.

The recent news of some servicers circumventing state laws to push foreclosures through quickly has brought every attorney general in the country together and pitted them directly against the servicing community as one powerful and determined force.

Some attorneys general have come out and said mandated loan modifications may be considered as part of a settlement with servicers who’ve filed improper foreclosure affidavits. But such a stipulation would only apply to those foreclosure cases where documentation was found to be defective, and it’s expected servicers will put up a strong fight against such terms.

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Untitled

Reconsidering Foreclosures, Short Sales and Listings in an Upside Down Market

When sales activity has diminished, as is the case in today’s market, appraisers have a much smaller pool of comparable transactions available to them. Such times require that appraisers give greater scrutiny to transactions that have traditionally been discarded. 

Here’s why and how appraisers are reconsidering foreclosures, short sales and listings in an upside down market.

Foreclosures
A sales transaction that complies with the definition of market value is often referred to as an “arm’s length” transaction. In this regard, an “arm’s length” transaction refers to a conveyance in which the parties are typically motivated, well informed, acting in their own best interest, have time to market the property and are not deploying unusual financing incentives.

Perhaps the most frequently cited example for a “non-arm’s-length transaction” is the sale of a foreclosed property. This is because, in a normal market, the mortgage balance is most often below market value. When the mortgage balance is below market value, the foreclosing lender has the option to cut the price of the real estate in order to achieve a quick sale.  This allows the foreclosing lender to terminate his investment in the loan quickly and favorably, without the risk of an extended marketing period.  Similarly, an owner who is selling in a normal market, under the duress of foreclosure, can cut his price for the purpose of quickly getting out from under a mortgage to salvage his credit. 

However, the relationship between the mortgage balance and market value is overturned under the recessionary market conditions we are presently experiencing. We all watched while the real estate bubble inflated larger and larger, rising to its fattest somewhere around the end of 2005 or early in 2006.  During this inflating period, credit was easily available and lenders were competing to make loans to buyers who were competing with other buyers in bidding up prices, often even higher than the original asking prices.  When the bubble eventually burst and values began to decline, many owners were left with huge mortgage balances. As the market declined precipitously, market values dipped below the principal balance on many mortgages, leaving owners “upside down.”  This situation was exacerbated as the supply of listings and foreclosures accelerated, while prices continued to plummet. 

These new market conditions created a new and abnormal relationship between the mortgage principal and market value. We now see that mortgage balances are often much more than market value. Foreclosing lenders are finding themselves with collateral that is worth considerably less than the mortgage amount. In many ways, this “upside down” posture makes a sale by a lender of foreclosed property much more similar to any other market transaction where a seller is simply trying to get as much as he can out of his real estate. No longer does the foreclosing lender have the ability of creating a “non-arm’s-length” transaction by simply choosing to liquidate the investment at below market value.  Instead, the foreclosing lender is now on equal footing with any other seller in the marketplace (typically motivated), simply trying to get the most money possible out of the real estate. Doesn’t this new set of circumstances equate the lender to any other seller?  Doesn’t this new set of circumstances qualify a sale of foreclosed property as an “arm’s length” transaction? 

Short Sales
One particular form of evidence that these transactions represent “arm’s length” arrangements is the emergence of the “short sale.”  A “short sale” is the modern label for a transaction in which the lender has simply agreed to accept a loan payoff that is less than the mortgage balance. In the circumstance of a “short sale,” there is no actual foreclosure because the owner and the lender (as well informed and well advised sellers) know that the value of their real estate and collateral has diminished and wish to take advantage of a present opportunity to get cash out of the property, just as would any other active seller.  There is no special or creative financing, only a mutual agreement by owner and lender to sell, just as any other seller might agree to sell. This often qualifies these transactions as “arm’s length” under current market conditions.

Nonetheless, many appraisers remain intent on avoiding the use of foreclosed and “short sale” transactions, claiming these transactions are representative of duress because of the depressed state of the recessionary market.  But the fact that these transactions are representative of the current state of the market is the very reason they are more worthy of our consideration. When the market is oversupplied and prices are low, we have an obligation to seek a value in our appraisals that realistically represents what a seller can obtain in the open market. The fact that a seller in the open market must compete with a plethora of other sellers, many of whom are lenders, cannot be ignored in any legitimate quest for market value. 

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Foreclosure, what does it really mean to people?

Miami, FL- (October 25, 2010) For the vast majority of homeowners, new questions about the state of foreclosures appear to be irrelevant. Few people seem to have been wrongly thrown out of their homes, and those who have been are generally months or years behind on their mortgage payments.

But the fallout from the crisis is beginning to be felt in real-estate markets across the country, particularly in places dominated by vacation homes and investment properties. Some of the worst-hit areas could be Western ski towns, because fall is the busiest time of the year for sales.

Real-estate salespeople in some of those places are worried. "September and October are usually the height of the selling-season for us," says Rich Armstrong, who owns the brokerage Rare Properties in Jackson Hole, Wyo. "Now we are seeing a number of what we call 'fence sitters,' people who would have leapt in even a month ago, but now are waiting on the sidelines."

The "foreclosure crisis" is a result of the frenzied real-estate boom and bust of the past decade. Banks made foolish loans, and borrowers signed up for them—only to default later, as the economy slumped. Banks rushed to reclaim properties, launching a record number of foreclosure proceedings.

In the past several weeks flaws have emerged in that complex process. Because of the high volume of foreclosures, the documentation supporting legal actions was prepared hastily, and some homes were seized improperly

Yet the far bigger worry is what happens next. A frenzy of lawsuits and banks' examinations of their own practices could throw more of the millions of foreclosures of the past few years into legal jeopardy. Attorneys general in all 50 states are investigating, and plaintiffs' lawyers are working hard to perfect their legal strategies for suits on behalf of people who have been foreclosed on.

The suits might well fail. But just the threat that past foreclosure rulings might be overturned could result in collateral damage. In some places, banks are rushing foreclosed properties to market. In others, buyers are stepping back, refusing to buy foreclosed properties or "short sales"—homes sold by owners for less than the mortgage balance. In markets already beset with large inventories of foreclosed properties, the result could be a slower recovery.

Coastal markets and ski areas are feeling the most anxiety. Some already are littered with foreclosures—in part because they're dominated by second-home and investment properties. Those owners are more willing to walk away from a house that isn't their primary residence.

Foreclosure tracker RealtyTrac estimates that, nationwide, 30% to 35% of properties in foreclosure are owned by investors or were second homes. In Aspen, Colo., the figure is about 60%, says Kim McKinley, owner of McKinley Sales Real Estate in Basalt and Aspen, Colo. If foreclosure proceedings slow from here, inventory could jump, leading to price weakness late

"We're concerned that the phantom inventory buildup will cause a more rapid and drastic drop in prices in Aspen, which is just getting started in terms of foreclosures coming to the market," says Ms. McKinley.

The timing of the foreclosure mess is especially inconvenient for ski towns, given the fall selling season.

Property owners are growing nervous. In Park City, Utah, lenders are quickly unloading foreclosed homes ahead of what could be a long, stalled foreclosure process, says Joe Trabaccone, a real-estate agent there.

On Oct. 11, for example, J.P. Morgan Chase put up for sale an 8,000-square-foot home adjacent to a private gated golf course. Mr. Trabaccone initially recommended the property be listed for $1.6 million, but Chase opted for $1.26 million. "They are offering these homes far too low just to hurry up and sell them," Mr. Trabaccone says.

Even so, it hasn't worked. A buyer made an offer and signed a contract, but then backed out.

In South Lake Tahoe, Calif., on Thursday, Freddie Mac, the big government-sponsored guarantor of mortgages, put a foreclosed home that had just been listed for sale on hold, freezing the property until paperwork could be straightened out. The foreclosure mess "seems to be filtering down and it could be an impact," says Doug Rosner, the broker who had listed the home. Three other properties in town were also frozen, another real-estate agent says.

The "sand states" of Arizona, California, Florida and Nevada are being hit as well. These areas, too, have a lot of vacation and investment properties—and a lot of foreclosures.

Robin Speronis, a real-estate broker in Cape Coral, Fla., says business had been picking up recently, with several inquiries a day—until the latest foreclosure scandal broke. Since then, she says, inquiries have shriveled to just one in the past week.

Susan Weeks, 55 years old, and her husband, Eddie, aren't optimistic. The couple had expected to retire and downsize when they bought a condo in Clermont, Fla., near Orlando, in 2007 for $192,000. Their plan was to sell their primary residence 10 minutes away and live in the condo. The trouble: They can't sell their first home.

The Weeks paid $269,000 for their three-bedroom home in 2004. The house next door, a bit larger, is listed at $185,000, Ms. Weeks says.

The couple has decided to move back to their primary home and take a renter for the condo. But while that brings in $850 a month, the Weeks take a $450-a-month hit on the condo —on top of the $2,400 a month they pay every month on their primary home.

"We're just going to wait it out," she says.

The possible foreclosure wars to come loom so largely over Florida markets that Ms. Speronis is urging condo sellers to consider any offer they get, even if it is far below asking price or what is owed on the mortgage.

Dianne Cloutier, a records supervisor in Chelmsford, Mass., had been looking for a retirement property in Cape Coral, but decided to wait because of the foreclosure mess. "It's left us on hold until we are sure the banks have legitimately foreclosed on people and that nobody can come back on us to get their property back," she says.

Foreclosures aren't the only problem. Short sales are getting more difficult to pull off, too.

In Bend, Ore., agents say buyers are avoiding short sales or even backing out of contracts because they don't want to deal with paperwork hassles or the chance of a court challenge later.

"I have some people saying 'I don't want to mess with bank-owned properties or short sales,'" says Dianne Willis, principal broker with RE/MAX Sunset Realty in Sunriver, Ore. "They're reluctant because it can be a frustrating process, especially for those who are looking to make a big move."

The short sales "can be very frustrating," adds Becky Ozrelic, of with Steve Scott Realtors in Bend. "You just have buyers waiting and waiting."

For sellers, lining up a short sale was tough even before the latest foreclosure crisis. Banks and mortgage "servicers," the outfits that process payments, already had been scrambling to handle surging workloads.

Mike and Kim Schwarz of San Jose, Calif., are coming up on the one-year mark on their short-sale saga.

The couple had acquired several investment properties over the past few years, including one in Thousand Oaks, Calif., for $751,000. After the tenants stopped paying rent, the Schwarzes couldn't cover the payments and decided to sell, Mr. Schwarz says.

They lined up a buyer in November 2009, and started working with their loan servicer on the short sale. For lenders, short sales are ugly because they guarantee a loss, but they often are preferable to a foreclosure, in which the lender is saddled with a tough-to-sell house.

The servicer, Residential Credit Solutions, took six months to process the paperwork, the Schwarzes say. Faxes and emails were sent, but nothing happened, Mr. Schwarz says.

"We typically don't hear from borrowers about long delays," says Dennis Stowe, president of Residential Credit.

The buyer walked away from the deal in June. The couple found another buyer in August, and resubmitted the short-sale paperwork. Mr. Schwarz says he has sent paperwork to Residential Credit four times since.

On Friday, Mr. Schwarz says, Residential called to tell him the short-sale paperwork looked good and the sale should close in mid-November.

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