A short-sale listing is one in which the owner still owns the property, but owes more money on his mortgage than he will get from selling the property. Short sales require the seller’s bank to agree to the final sale price. If more than one bank holds a mortgage on the property, each bank has to approve the sale.

Short sales are different than foreclosures or bank-owned properties. If the home-owner cannot sell the home through a short sale, the bank initiates foreclosure to try to sell the home directly, often in an auction. If the auction fails to turn up a buyer willing to pay at least what the bank was owed on the home, the home becomes Real Estate Owned (REO), where the owner is the bank. The bank then typically sells the property through a real estate agent.

If you are planning to make an offer on a short-sale listing, you should be ready to wait as long as one year for the banks involved in the process to approve or reject your offer. Many types of short sales are a long-shot. If you make an offer on one, you may want to continue touring and considering other homes in case the short sale does not go through.

Because the chance of success on short-sale offers is extremely low, TheLARealEstateTeam.com does not support short-sales for tours or offers.

Home sales increased 84.9 percent in December in California compared with the same period a year ago, while the median price of an existing home fell 41.5 percent, C.A.R. reported yesterday. “Sales continue to be strong, exceeding 500,000 units for the fourth consecutive month, and year-to-date sales are nearly 27 percent above last year,” said C.A.R. President James Liptak. “California home buyers benefited during the last half of 2008 from the high-cost loan limit of $729,750, which fell to $625,500 as of Jan. 1. The restoration of the high cost loan limit to the previous level would not only help a housing market still struggling to turn around, but also make financing more affordable for home buyers.”

Closed escrow sales of existing, single-family detached homes in California totaled 544,580 in December at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity increased 84.9 percent from the revised 294,520 sales pace recorded in December 2007. Sales in December 2008 increased 5.9 percent compared with the previous month.

The median price of an existing, single-family detached home in California during December 2008 was $281,100, a 41.5 percent decrease from the revised $480,820 median for December 2007, C.A.R. reported. The December 2008 median price fell 2 percent compared with November’s revised $286,850 median price.

According to Reuters on October 31st, 2008

Nearly one in five U.S. mortgage borrowers owe more to lenders than their homes are worth, and the rate may soon approach one in four as housing prices fall and the economy weakens, a report on Friday shows. About 7.63 million properties, or 18 percent, had negative equity in September, and another 2.1 million will follow if home prices fall another 5 percent, according to a report by First American CoreLogic. The data, covering 43 states and Washington, D.C., includes borrowers nationwide, even those who took out mortgages before housing prices began to soar early this decade. Seven hard-hit states — Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio — had 64 percent of all “underwater” borrowers, but just 41 percent of U.S. mortgages… U.S. home prices fell a record 16.6 percent in August from a year earlier, with declines in all 20 major metropolitan areas measured by the S&P/Case-Shiller Home Price Indices. Foreclosure filings rose 71 percent in the third quarter to a record 765,558, according to RealtyTrac.

Meanwhile, the Commerce Department said gross domestic product fell at a 0.3 percent rate in the third quarter. Some experts expect the worst U.S. recession since the early 1980s.