I keep hearing several agents saying, "this is the END of short sales..." after the (2) big game changers: 1.) Robosigning settlement and 2.) Homeowners Bill of Rights.

Here's my take: until the market reaches 2006 prices AND the economy stabilizes, there will still be short sales. 

In many markets, more homeowners purchased a home or took cash out from 2004-2006 than any other 3 years in Real Estate history. Many of those upside down loans still remain out there.

Additionally, prior to the (2) game changers mentioned above, approximately 50% of my short sale listings sold were already on modified loans -- some of them as low as 2% over 40 years combined with generous principal reductions. 

In one case, I remember a client who lucked out as one of the rare HAMP 2MP (2nd lien extinguishment) approved loans along with a 2.5% rate on the existing 1st. They still ended up doing a short sale. 

When going on these listing appointments, I wasn't surprised at the amount of homeowners that wanted to sell after some of their payments were cut in half. As someone who had lost a home in the 90's (and later filed BK at a young age), I know EXACTLY what they're going through. Here's some of the reasons why selling becomes the best option:

1. After 2 years of not making ANY mortgage payment, habits develop and you adjust your spending accordingly. There's a common theme for most homeowners who haven't made a payment in a long time: they have almost nothing in the bank -- even while staying employed during the delinquency period.

2. Some homeowners have compared the cost of renting vs. owning. Even after a generous principal reduction, one analytical homeowner had a cost breakdown where it would take at least 5 years for his home to appreciate to his principal amount. He pointed out that he can purchase again in 2-3 years, and that scenario would end up favoring him by $50k.

3. Some homeowners want to "move on" from a difficult situation - a homeowner once told me, "that home was an everyday reminder of my failures, bad marriage and bad luck. I wouldn't care if the bank lowered my payment to $10 a month. It was time for a new chapter in my life."

4. Young professionals who will move back with family - some recent college graduates described their home ownership experience as "too early." Some clients in that group felt the landscape in the job market doesn't offer a salary they were expecting and chose to obtain an additional degree while they live at home with their parents. 

5. Home ownership isn't for everyone - in an ideal world, everyone would own a home. In reality, there are some people who prefer that someone else take on the investment risk, maintenance, taxes, etc. 

What % of your listings have existing loans that were modified? What are the reasons you're encountering?