New Inman contributor Michael Kerin writes that the next few years will reward agents who are comfortable navigating complexity, especially for a demographic of buyers who have made the effort to enter the market.
Most residential agents working today have built their careers in a market shaped almost entirely by appreciation. List it, sell it, and move on.
Short sales and foreclosures were a distant memory or something I had only heard about from older colleagues. This was probably good because the market didn’t need much else. However, the market has a way of introducing new skill requirements with little advance notice.
Why capital levels are misleading
The $34 trillion in homeowner equity that keeps being quoted in the financial press sounds like a reason not to worry. Also, looking at where the stock actually stands is somewhat misleading.
The lion’s share, about 40% by some estimates, belongs to homeowners 62 and older who bought their homes decades ago and have little intention of selling, whose home equity recently reached $14.66 trillion, according to the NRMLA/Risk Span Reverse Mortgage Market Index.
That capital is effectively withheld. What’s left is spread out among everyone else, telling a more complicated story, especially for buyers who entered the market during the pandemic’s surge.
From 2021 to 2025, millions of buyers entered the market at or near peak prices, but many took advantage of low down payment programs and had thin equity cushions from day one.
The industry defines “severely submerged” as having debt that is at least 25% more than the property’s value. Approximately 1.2 million homeowners will already meet that criteria in early 2025, and that number is growing every quarter. And that figure doesn’t include the actual cost of selling, which is typically 8 to 10 percent of the sales price after taking into account fees, closing costs, concessions and transfer taxes, etc.
When sales costs become an issue, the number of truly distressed borrowers could be close to 2 million or more.
The reality is that clients who appear to have assets on paper may actually have little room for maneuver when a sale is considered.
Economic pressures on these borrowers have also worsened in ways that were not initially apparent. Fixed asset tax has increased. According to ICE Mortgage Technology, insurance premiums have increased significantly in many markets, with average annual premiums increasing nearly 70% over the past five years. Student loan payments have resumed. My credit card balance has increased.
Borrowers who were approved with a 45% debt-to-income ratio a few years ago may now be spending more than 60% of their gross income on housing and debt combined. Many of those same buyers purchased older homes because new construction was out of reach, as there was no cushion left for broken HVAC or roofs that needed replacing.
Deferred maintenance is important for agents because it quietly undermines value in ways that are invisible until a deal begins. Homeowners who are under severe financial strain will eventually stop maintaining their properties, and by the time a short sale or foreclosure is considered, there can be a large gap between the listed price someone hopes to get and what the property will actually support.
Foreclosure filings rose 14% in 2025, according to Atom, but the trend was modest and not enough to cause widespread alarm. Slow trends are also prone to setbacks.
Lenders, on the other hand, are increasingly willing to pursue short sales rather than going through the full foreclosure process, which took an average of 671 days from initial public announcement to completion in early 2025. A negotiated short sale returns the asset in better condition, lowers overall costs for the lender, and allows the property to be returned to productive use more quickly.
short selling skill set
This is important for agents because short sales require a different skill set than traditional trading. Short sales involve an active third-party lender, documentation requirements that far exceed those of traditional transactions, and timelines that are extremely difficult to predict. Agents who are familiar with this process may find their expertise more in demand than in recent years.
I have seen what happens when agents are not familiar with the short sale process. And I’ve seen it many times. During the surge in REOs and foreclosures since 2008, I found many times that short sales never closed.
reason? This agent was unfamiliar with the lender’s requirements for completing a short sale and just sat there after the contract was signed. They did not provide documents required by the lender, such as hardship letters and pay stubs.
My guess is that almost half of the short sale deals that should have been successful don’t go through and instead end up in foreclosure simply because the agent wasn’t familiar with the process, and once you are, it’s really not that complicated.
A significant portion of sales opportunities now can, and likely will, come in the form of short sales. Agents need to understand the process before such a surge occurs.
At this time, agents and brokers need to become familiar with short sale procedures, understand what lenders are actually looking for from listing agents, and know how to have honest conversations with sellers whose equity position is weaker than they think.
This doesn’t mean the market is headed for a repeat of 2008 or that all agents need to pivot their entire practice. That means that agents who are comfortable navigating complex situations may be rewarded in the coming years, especially for those striving to enter the market and feeling the weight of their decisions.
This group is larger than the headline numbers suggest and will need competent representation when the time comes.
Michael Kerin is president of the National REO Brokers Association and author of the Certified Short Sale Expert training program.
