Short Sale Agents IN A PANIC!!!- Don't Jump Off The Ledge Quite Yet!!!
What may have caused the commotion:
I read a post a day or two ago by one of my fellow short sale experts- Bryant Tutas. Byrant is not only a short sale expert, but he's a well-known blogger (and one of my favorites) on activerain.
Disclosure: Actually, I'm also a member of Byrant's and Wendy Rulnick's awesome Short Sale Superstars network. Click this link if you'd like more info on Short Sale Superstars.
That said, Bryant's post was about how Matt Vernon (Short Sale and Deed In Lieu Executive with Bank of America -B of A) had recently communicated that B of A was looking to more actively use the Deed In Lieu option versus the foreclosure option because it's cheaper and it gives them overnight control of the property. Click here to see Bryant's post.
The comments that followed Bryant's post seemed to be very concerned or worried that this seemingly new position from B of A was going to hurt their real estate business. I don't blame people for being worried about things that might hurt their ability to produce income - I worry about that too! But, I don't think this deed in lieu versus foreclosure is anything to worry about.
The reason to remain calm:
Folks, I think we're all prematurely getting our panties in a wad and seeing the ends of our short sale/real
estate businesses.
As Paul Harvey used to so famously say, "and now - the rest of the story". Deeds in lieu have always been an intermediate step between short sales - as the most preferred option, and foreclosure - as the least preferred option. Foreclosures take longest and add tremendous costs to the file that can be avoided by doing a deed in lieu. No argument or question there. I think we can all pretty much agree on that and I think that was the rationale for Matt Vernon's train of thought as related by Ken Harney in Bryant's main post.
This is only part of the issue though. If you'll take the time to review a somewhat longer story by the esteemed real estate journalist Diana Olick (CNBC Real Estate Reporter), you'll be reminded that REOs (of which deed in lieu properties soon become) have a 13% higher risk severity than short sales. Click here to see Diana's article. Further, REOs sell at about double the discount off of fair market value as a short sale.
Given these two important metrics (higher risk, higher cost), why would B of A (or any servicer or investor) favor deeds in lieu (read REOs) over short sales? IMHO - they won't. But they could, should, would absolutely consider a deed in lieu over a foreclosure. And I, and lots of us agents/brokers who work in this niche everyday, will support that!
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