I remember a little over a year ago I received a phone call from a residential investor who was part of the coalition of investors who retained me to help revive the short sale market.

His opening comment can generously be described as terse:

“I’m out.”

I explained to him that he would need to amplify his comment, because I had absolutely no idea what he was talking about.

“Short sales are dead, they are not coming back, and everybody knows it.”

Despite my efforts to convince him otherwise, he left the coalition and the short sale market.

One Part of Me Couldn't Blame Him

I have an e-mail dedicated exclusively to marketing messages from real estate educators and gurus. At that time, if you printed out every e-mail announcing the death of short sales, you could have wallpapered the Empire State Building.

But another part of me was disappointed. My former client was “in the know”, having access to information possessed only by me and my other clients. He knew we had been working diligently with Congress and FHFA, and that I had received a letter from FHFA unambiguously indicating imminent changes to the short sale market, and invited me to a meeting to discuss the plan in the near future.

This is what we call having “a seat at the table” and it’s what we work so hard to establish on behalf of you – the otherwise grossly ignored real estate investment community.

While Daunting, the Task Before Me Was Simple

I had to shift governmental policies away from exclusive concentration on programs that were failing, and create an environment where short sales were not only available, but encouraged.

This could not be done without agreeing upon one set of rules, one national standard governing the short sale transaction. The hodgepodge of rules and restrictions already around were, in fact, choking short sales, restricting consumer choice, and causing chaos throughout the industry that resulted in many investors throwing in the towel and abandoning short sales altogether.

The Work of Changing Paradigms

In 2012, I met with FHFA and presented a framework for a national short sale program. Additionally, I met with members of Congress, banks, and trade associations to discuss the plan and terms for a new national policy that recognized the importance investors could play in providing options to distressed homeowners, rebuilding communities ravaged by the housing crisis, and unwinding Fannie and Freddie.

Real estate investors are a crucial piece of the very backbone of a healthy housing recovery. My aim was to help the powers-that-be not only recognize this, but to begin officially acknowledging it in housing policy – a much better solution than ignoring or demonizing them.

The Death of Short Sales?

Last year I believed the short sale market was improving, but could not prove it. And once FHFA established its national Standard Short Sale Program in November, I had particularly high hopes for the fourth quarter of 2012.

The numbers are in. I’ll start with some media headlines from February of this year:

• Nevada: “Nevada Foreclosures Fall, But Short Sales Spike”
• Oregon: “More Short Sales, Fewer Foreclosure Sales in 2012”
• Ohio: “Foreclosures, Short Sales Nearly Half of Ohio Home Sales in 2012”
• Bloomberg (National): “Foreclosure Deals Drop as Banks Approve More Short Sales”

These are not opinion pieces or editorials, and they are not the musings of gurus. They are hard news stories based on empirical data.

While gratified by the overall trend upward, I was particularly happy to see the data from the fourth quarter of 2012. During QIV 2012, just over one third of all residential transactions were short sales. The Bloomberg News piece specifically mentions theFHFA Standard Short Sale Program we worked so hard to craft as a catalyst for the rise in short sales transactions.

These numbers are not the result of a one-time glut in inventory hitting the market. Rather they are evidence of a seismic shift in the short sale market due to a national framework that:

1) Eases restrictions on investors, and
2) Promotes shorts sales to banks and servicers as a viable option.

While the introduction of the program may have created a spike, estimates for the remainder of the year have short sales comprising 25% of transactions for much of the year, and then perhaps tapering off to 15% by the close of 2013.

Fighting the Good Fight

Perhaps most important to understand, these numbers are a result of a handful of true leaders in the residential investing market who chose to fight, rather than surrender.

These leaders chose engagement over complaint, reasoned argument with political leaders over ranting, and the risk of failure over the impotence of inaction.

The work of our group, the Distressed Property Coalition, is hardly complete. Nor are we satisfied with the current state of affairs concerning housing policy.

After two months of meetings on Capitol Hill, I recently wrote a letter (available to subscribers to DPC's monthly newsletter) to FHFA Acting Director DeMarco outlining additional pro-investor policy changes on short sales, REOs and valuations. I plan to share his response in the near future.

We've barely just begun.