How to Improve the Short Sale Process
By Bob Boog
Common sense tells us that banks should work harder with realtors to finalize short sales. After all, a successful short sale offers the bank more money, fewer problems and less man-hours than dealing with selling a foreclosure. The bank has less headaches with evictions, repairs, public nuisance complaints and lengthy bankruptcies too. And in a declining real estate market, money returned more quickly to a bank usually means higher profitability. So here are three ideas to help streamline the short sale process.
•1. Use a price specific approach, not a buyer-specific approach. Not too long ago, I received a phone call. The person on the other line told me that my short sale had been approved. The lender would net $300,000. Yay! Unfortunately, the purchaser who had waited six months for this good news, did not share my enthusiasm and basically told me to "Go pound sand." Fortunately, another agent brought a contract two days later: an offer that would net the lender $300,000. However, because the lender used a buyer-specific approach to the approval, we had to start the entire process all over again for Buyer #2 (getting a new appraisal, new hardship letter from seller, new paystubs etc.) My point is this: wouldn't it save time and money to use a price-specific approach that would expire in 30 days? This way, within 30 days a realtor could find Buyer #2 who might be able to step in and close escrow successfully.
•2. Create a "Desktop Underwriter Program for Short Sales." It makes no sense that a loan can be approved in ten minutes, yet a short sale (on the average) takes about 90 days to get approved. With the staggering sums of money bandied about (800 billion) can't the same computer geniuses who created the securitized loan system figure out a way to automate the short sale process? If not, then simply hire more staff. Shortening the short-sale process would save time and money. After all - time is money, and striving to shorten the approval time to 30 days might end up saving billions of dollars.
•3. Have Better Communication about the Process. Not long ago, I got some good news. Supposedly the other agent had a friend who worked in the bank and could get the offer approved quickly and easily. Unfortunately, the short sale was declined. Why? Because the lender said the seller was currently doing a loan modification. Yet, my client had already been turned down, so I called the loss mitigation department and reviewed my client's financials, sure enough, he still didn't qualify. The moral of the story: sometimes the left hand of the loss mitigation department doesn't know what the right hand is doing.
The problems with short sales are many and varied, but working on a way to shorten the time period for approval would help everybody - sellers, lenders and agents. As the market begins to improve, as we all know it will, having a reasonable approval time for short sales will be an integral part of the mortgage meltdown recovery.
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