We have issues in our real estate market right now. Inventory is low and there are still a good number of foreclosures on the market and short sales are taking forever. Add in the low rates and a good number of people who want to buy a house right now and we have our current market.
I have an idea where the market is moving and I am actually excited about it. I think short sales are the next big wave and I see it as a positive in today’s market and a way to heal the real estate market and help the economy.
For those of you who do not know what a short sale is, it is where the seller of a home sells it “short” or for less than is owed on the property. If your house is worth $250,000 and you owe $300,000 on it and you don’t have $50,000 plus costs lying around, you can still sell the home as long as the bank that holds your note will take $250,000 minus expenses to settle that debt. Why would they do that people ask. Because taking a home back in foreclosure is expensive and takes a lot of time and when you get the house back it is still only worth $250,000. Taking the short sale actually makes financial sense for the banks.
The biggest issue with short sales is that the banks are taking months and months to analyze the offer on the table instead of relying on the real estate agents who have the listing. I have been involved in some short sales that took almost a year to close. This simply has to change.
I predict that banks will be looking much more to the short sale as the best answer as a good alternative to a foreclosure. I believe that banks will be working towards streamlining that process in order to save time and money as well. I am hopeful that the banks will put together a process that establishes a price range that they are willing to take upfront and then move towards that goal with the homeowner and Realtor. The biggest issue we have here is that a homeowner accepts an offer that is contingent upon bank approval. The Realtor then submits a mountain of paperwork to the lender and we all wait for them to respond. The banks need to get proactive to make this work.
I want to make a plea to Realtors and homeowners alike to work towards short sales now more than ever. I honestly believe that this will help us as a nation move forward. Everyone needs to do their part.
Homeowners: I want you to take a good hard look at your situation and if a modification or a refinance will serve you, do it! But if a short sale will serve you, please get on that right away. If you wait you could be facing foreclosure and this is a way to get that burden off your shoulders and your credit can rebound faster with a short sale than foreclosure.
Realtors: I know short sales are a pain and some of you have embraced them and others, not so much. If you will look into your past clients and friends and family, you can uncover some short sale needs and you can help these people remove a financial burden and make some money as well. You can create business where we need it most and make money and if I am right, you will be poised when the wave of short sales hit and banks need short sale experts.
Loan Officers: If you have a client that does not fit into a HARP loan or HAMP modification then please tell them the truth and refer them to a good Realtor for a short sale. This will benefit your client and that Realtor relationship.
Please send me your real estate and mortgage related questions. I am happy to answer you and it may become the topic of a future article.
Hans Bruhner is a branch manager for First Priority Financial. Hans is licensed by the CA DRE # 01085398 and NMLS #243484 and First Priority Financial is licensed by the CA DRE # 00652852 and NMLS #3257. If you have a question, please contact him at (707) 347-9250 or hans@fpfmail.com
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