First-Time Homebuyers Buying Fewer Short Sales

With a significant supply of foreclosed properties on the market and a number of homeowners interested in short selling their properties, first-time homebuyers have had ample opportunity to purchase a distressed home. However, a new report suggests more have grown discouraged with the short sale process.

According to the latest HousingPulse Tracking Survey from Campbell Surveys and Inside Mortgage Finance, first-time homebuyers were responsible for only 39.7 percent of all short sale acquisitions during the month of August. That was well below the 54.1 percent peak for first-time buyer activity in this market, and was the lowest recorded share of short sales sold to first-time buyers in the survey's history.

Short sales - which occur when a property is sold for less than the remaining balance on the mortgage - can appeal to homesellers and buyers alike. For homeowners, they represent an opportunity to sell a home quickly - though at a hit to their credit score. For buyers, it means an opportunity to buy a property for significantly less money. Home improvement loans and investor loans then provide some with the financing needed to fix up homes that required a bit of work before the move-in date.

However, the report said many first-time homebuyers are uneasy regarding the amount of time it takes to process these transactions. These properties stay on the market for up to 16.6 weeks, with a large part of that time spent waiting on an approval.

Regardless, if buying a short sale seems sensible to you, do your research first. Take a good look at a property's condition and evaluate its potential. Ensure there aren't any unpaid liens on the home - which could create conflict down the line - and work closely with all parties involved, including lenders, the seller and real estate agents.