CHICAGO - Sept. 21, 2009 - A few years ago, few people in the housing market had ever heard of a short sale.
Mention the term today and people, whether they are homeowners or real estate agents, just roll their eyes.
The practice, which involves selling a property for less than the amount owed on the mortgage, has grown in popularity as an exit strategy for financially strapped homeowners because it doesn't ding a credit report as deeply as a foreclosure. But because the transactions have to be approved by first and second lien holders, they are languishing. Some real estate agents try to steer clear of them entirely and even specify in their listings that a property is not a short sale.
The Obama administration is aware of the frustrations. In mid-May, Treasury Secretary Tim Geithner announced plans to streamline the process by offering financial incentives to mortgage servicers and investors that accept short sales, much in the same way that they are rewarded for refinancing or modifying troubled mortgages.
Four months later, homeowners, real estate agents and lenders are still waiting for specific details of how the plan would work. A Treasury Department spokeswoman said an update on the program is expected in a few weeks.
Meanwhile, homeowners like Dallas O'Day are in limbo.
O'Day, a Chicago attorney, and his family relocated from California in June 2004 and bought a Mediterranean-style home in Chicago's Beverly neighborhood for $395,000. They rewired the house, stripped and refinished the wood floors and the woodwork and did other work to restore its charm.
Last year, personal circumstances prompted them to list the home for sale just as the housing industry's meltdown was picking up steam. With no takers and no longer even expecting to break even on his investment, O'Day relisted the 2,700-square-foot home in January as a short sale.
Four months and three price reductions brought the house down to $384,900, at which point a potential buyer made an offer in late May. O'Day accepted it and submitted the paperwork to the lenders holding first and second mortgages on the home.
He has yet to receive a response. Meanwhile, the family has moved into a North Side apartment, the refrigerator has broken in the home and there's evidence of mold in the basement.
"The only thing we keep hearing is they keep wanting current payroll stubs, bank statements and taxes," said O'Day's real estate agent, Pam Decker at Prudential Biros Real Estate in Evergreen Park.
"What has astonished me is that in the presence of one of the softest housing markets I can remember, we're hitting up on four months and they've just had a person assigned to look at it, that they would move at such a glacial pace," O'Day said. "My expectation is I'll be renting until whatever blemish is gone. I've just accepted the fact that at some point it'll be foreclosed upon because I just don't think the banks will pull it together. I feel like I've done everything I can do."
During the second quarter, 14 percent of all home sales were short sales and they were made primarily to first-time buyers who may have more flexibility to deal with the long wait times, according to a survey by Campbell Communications. The sales volume could be much greater. Two out of three short sales never close.
"In general, you have to have three offers for every completed short sale," said survey designer Thomas Popik. "The first offer, the buyer walks before they get a yes or no. On the second offer they walk a good part of the time. The third offer is the charm because it's been in process long enough at the lender that [the lender] knows they want to do this.
"Home buyers are now putting in half a dozen verbal offers, hoping that on one of them the lender will say yes. What this is doing is bogging down the approval [process] at the mortgage servicers. It's just gotten to the point that everyone has started engaging in unproductive behavior. It's a vicious cycle."
The process of getting a short sale approved involves a packet of documents that includes bank statements, tax returns, letters explaining any other sources of income and a hardship letter explaining why a short sale is being sought.
After the packet is submitted to a mortgage servicer, it has to be entered into the system, a person has to be assigned to it, and an appraisal has to be ordered for the property. On average, it took loan servicers 9 1/2 weeks to respond to a short sale offer, Campbell's survey found.
"You've got to stay on top of these banks," said James Orrico, a real estate agent at Professional Residential Brokerage LLC in Oak Brook. "I call on my files every day. If you don't stay on top of them, you'll lose it."
But not every real estate agent is willing to deal with the process. Online realty company Redfin doesn't show or write offers on short sale properties "because of the slim chance that you'll get the home," according to its Web site.
A number of factors are contributing to the delay. Lenders say their top priority is keeping people in their homes, and their own and the government's loan modification programs are taking the bulk of their resources.
"The modification [program] was just like an atom bomb that dropped on [servicers]," said Matt McCabe of National Short Sale Center, a company that acts as a negotiator between borrowers and mortgage lenders. "They had a really hard time reacting to that increased demand."
Wells Fargo Home Mortgage, which services more than 8 million mortgages, said it has cut the average 60-day response time on short sale offers to 30 to 45 days.
"We're not satisfied with that number," said Tamara Swain, senior vice president of real estate owned and short sales at the lender. "The current goal is 15 to 20 days. This has been a big learning process of a function that wasn't very prominent a couple years ago."
Also delaying the process is that if a home can't be saved, servicers are keen on trying to recover as much as possible for what could be multiple investors and that requires a fair amount of due diligence.
"The challenge is buyers always want to pay as little as possible and sellers want to receive as much as possible," said Tom Kelly, a spokesman for JPMorgan Chase, which services 10.3 million mortgages. "The bank is the server in the middle."
From a prospective buyer's standpoint, purchasing a short sale property can be preferable to a foreclosure because if the borrower stills owns the home, he or she is likely to take better care of it.
However, with so many distressed properties for sale, and other homes selling conventionally at drastically reduced prices, there's a wealth of inventory available allowing buyers to get a quick yea or nay to their offer. Some buyers make offers on multiple short sales or write the offers so they can walk away if a lender doesn't respond within a certain time frame.
Xia Zhao and her family thought they'd found their next home when they walked into a Jefferson Park townhouse that was listed as a short sale. It was large and near her son's school. However, they walked away from the offer after a month because they still hadn't received a response and were worried they wouldn't be moved in by the time school started.
Instead the family bought a new town home with a price that was cut by the developer in the city's Old Irving neighborhood.
"I guess we're not people with extreme patience," Zhao said. "What if you wait for a couple months and this goes away? You have to start all over again."
"Most people really aren't in a situation where they can deal with the uncertainty," said Zhao's real estate agent, Eric Rojas at Prudential Rubloff. "Even when you explain that it's not accepted until the bank accepts it and you build these safeguards into the contract, people are dropping out, left and right. These sales would get done, but people just can't wait."
Chicagoan Marie Cabrera, a real estate agent at Baird & Warner, is hoping she has found a purchaser with some patience.
After being unable to sell her own condo in the luxury Palmolive Building, Cabrera decided she didn't want to simply wait for her lender to foreclosure on it. Earlier this month she listed it as a short sale, priced at $1.15 million. Within a week, she had a cash offer of $1 million that she sent to her lender.
"I have no idea whether the bank will take it," Cabrera said. "I have an offer that's solid and they're willing to wait."
John Stossel in an interesting little video about free healthcare. I don't care if you are Democrat, Republican, Libertarian, Independent, or whatever.
If you are an American, you really need to see this video. It's an eye-opener!
The numbers marked on plastic containers indicate the type of resin that was used to produce the plastic. Click here ...
for a link to a handy chart by the American Chemistry Council that tells us what the numbers mean.
Most curbside recycling programs allow plastics with the numbers 1 and 2. By checking the number, you'll know if, how, and where to recycle these containers.
I've been feeling disappointed in the Democrat and Republican parties for a while now. I realized that the Democrats are too far left for my taste in many of their platforms....and the Republican Party is little bit too far right.
I don't like feeling disappointed and helpless.
So, I switched parties and am now a Libertarian. It feels right for me.
Just wondering if any of you have felt what I do and....if you have switched to a party that's a better fit for you.
I know politics is a volatile subject and I'm not asking about your political persuasions. Don't even tell me WHICH party you've switched to. I'm curious only to know if you've switched.
I found an interesting video today while reading the April 2009 issue of Better Homes and Gardens (and, yes, I will recycle the magazine!)
In Hillsborough County, Florida, we are allowed to combine our paper, plastic and glass in one container for recycling pickup. I always wondered who (or what) does the separating of these items.
Now we all know......
Fawn Ridge is an established, beautifully planned, deed-restricted community in Citrus Park, Florida, in northwest Hillsborough County. The entrance, with its gently curving drive and lush landscaping, is located off of Sheldon Road. The community is made up of approximately 700 homes, many that edge up to beautiful conservation areas. There are several ponds on the property (one with a gorgeous fountain) which lend a peaceful and relaxing atmosphere for the many walkers, bikers, joggers, and rollerbladers.
Fawn Ridge is fortunate to have a County park in its midst with restrooms, a baseball field, a basketball court, and lighted tennis courts. The park is where the neighbors gather together for lots of community events.
Fawn Ridge is a great place to live and raise your family. The Veteran's Expressway, Pinellas County beaches, and Tampa International Airport are all convenient to Fawn Ridge. The upscale Westfield Citrus Park Mall is close by, as are many fine dining and fast food establishments. There are no CDD fees and the homeowners association fees are about $300 annually.
Contact Peggy Edwards, Realtor® associated with Keller Williams, if you would like to know more about Fawn Ridge. Email Peggy, your Fawn Ridge expert, at Peggy.Edwards@msn.com, visit her website at www.GreenTampaBayRealtor.com, or give her a call at (813) 787-2923. If you're looking for a new home, you'll want to see this beautiful community.
Westchase is located approximately 12 miles northwest of Tampa. It is divided into separate and distinct neighborhoods - all price ranges are represented and each neighborhood is simply lovely:
Abbotsford
Arlington Park
Bennington
Berkeley Square
Brentford
Bridges
Castleford
Chelmsford
Classic Townhomes of West Park Village
Enclave
Glencliff
Glenfield
Greens
Harbor Links/Estates
Keswick Forest
Kingsford
Radcliffe
Saville Rowe
Shires
West Park Village- Single Family
Stamford
Townhomes of West Park Village
Traditional Townhomes of West Park Village
Tree Tops
Village Green
Villas of West Park Village
Vineyards
Woodbay
Worthington
Wycliff
The Westchase area of Hillsborough County, Florida offers many beautiful homes and communities from which to choose. As a buyer, the possibilities are almost endless. You owe it to yourself to see what properties are available right now. Westchase offers tons of amenities and its location in northwest Hillsborough County is ideally situated. Westchase gives you easy access to the white sandy beaches of Pinellas County, downtown Tampa (via the Veterans Expressway), Tampa International Airport, Westfield Citrus Park Mall, International Plaza, and all area bridges.
Westchase offers:
Golfcourse
Swim Club
Shopping
Dining
Playgrounds
Community Pools
Many gated communities
Parks, lakes, and gorgeous conservation areas
Public schools located within the Westchase community
Hillsborough County Public Library
Westchase has it all!
So what are you waiting for? Dive in......the water's fine!
Please contact me if you are interested in the Westchase/Citrus Park area of Hillsborough County. It would be my pleasure to assist you and your family!
Peggy Edwards REALTOR, Green Designation Coldwell Banker Residential Services Citrus Park/Westchase, Florida "Opening Doors For You in Citrus Park, Westchase, and Surrounding Communities" www.GreenTampaBayRealtor.com (813) 787-2923
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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