The downward spiral of real estate prices has no bottom when brokers and sellers are allowed to list properties for sale below what is owed to the lender, affecting the perceived value of all surrounding properties. While short sales are being touted as one of the many solutions or quick fixes, we know that not every client meets the requirements to successfully close a sale through this process. Most lenders only agree to a short sale if the seller can produce compelling documentation of financial hardship that typically includes a handwritten affidavit, financial statements, revision of accuracy of the original loan documents, recent tax returns, bank statements, and pay stubs. These requirements change from one lender to the next. Unfortunately, there is one more thing that must happen for most lenders to even consider a short sale: the borrower must be at least one month late in their obligations. If the loan is in good standing, the loss mitigation departments of most lending institutions will not consider the borrower eligible for a short sale. This encourages large numbers of people to willfully go into default.
Short Sales are simply not the solution for everyone. It is a dangerous idea that preys on people's hopes, not to mention makes the current mortgage crisis worse. The truth is that most short listings will never get to the closing table. There are just too many factors to take into consideration. The short sales agreement is subject to the lender's approval. Closings can be subject to marketable title. There could be multiple liens on the property. The offer presented could be too low for the bank's expectation or below the appraisal/broker's price opinion. The seller may not qualify for the program. The buyer may lose interest during the process, which can take as long as six months. The area or condo may be blacklisted. There are simply too many uncertainties surrounding this dangerous practice in these unprecedented times.
These short sales also affect the perceived value of our real estate, the appraisals and assessed values, which have further consequences then the immediate sale. If the assessed value is reduced, how is our state budget going to be affected? What about the stability of the country as a whole? Can we really afford to look the other way? I don't think so, and I am sure there are more issues that will come up once we get started on this project.
Where do we come in? Well, we must get involved or at least try to help on this matter. It is clear that we both share the same passion for our business and love for our country. Not to sound tragic or hopeless, but if we don't act, we could be witnessing the assassination of the American Dream and selling this country short.
I remember when I was studying for my Real Estate license I learned that the licensing of Realtors came about to protect the people. Laws, rules and regulations were created to that effect. Is it possible that we need a new regulation when it comes to this particular subject? Perhaps the Department of Banking & Finance, together with Real Estate Licensing bodies, can come together to set guidelines regulating short sales.
I believe we can make a difference and bring our point of view on this subject to the right people. We must bring the issue to our contacts in the highest level of government - and we must act now. We can discus some of these ideas, but there is much more to do.
As a Broker some of my agents at Terrabella Realty have short sales listings and also work with buyers looking for short sales opportunities; however, I have explained to them my thoughts and opinions on this issue. The solution and ideas to resolve the matter can be achieved.
Sincerely,
Gustavo F. Blachman
Broker - Owner
Terrabella Realty
Comments(1)