THE LATEST WORD FROM LENDERS ABOUT SHORT SALES - OR WAS IT?

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

MORE AND MORE SHORT SALE LISTINGS in your market???  SAME HERE. 

GET USED TO IT!  It's going to get worse before it gets better.

LIVE AUDIO CONFERENCE - NEW GOV'T SHORT SALE PROGRAM

Yesterday, I attended an interesting conference on Short Sales.  1.5 hours of short sale talk presented by speakers from Wells Fargo, Bank of America, Campbell Surveys, Freddie Mac, and two additional information providers. 

The MD/Northern VA market is not as bad as some geographical areas across the country, the worse being CA/NV/FL and some others.  However, in some price ranges, it's difficult to find a property listed for sale that isn't a distressed sale.   Freddie Mac has had a 600% increase in Short Sales in the past year and predicts twice that number this year.  I ran stats for 4 counties in my market area and found short sale listings as follows:

     ACTIVE Listings      Short Sale Listings
County #1 4614 1480
County #2 2647 500
County #3 2364 389
County #4 1136 246
     

These numbers reflect ALL listings.  The percentage of Short Sale listing is higher in lower price ranges.

WHAT IS A DISTRESSED SALE??  Depends on whom you ask!Home for Sale Sign

This is important because the definition of "distressed sale" as determined by Wells Fargo and Bank of America does not include Short Sales.  These top two lenders consider Short Sales regular sales.  They consider distressed sales to be bank owned listings.

However, on page 14 of the SURVEY, Short Sales are, indeed, included in the survey as a distressed sale.

FOR A REVIEW OF THE MATERIAL COVERED IN THE CONFERENCE, read the 66 page report of the survey prepared by Campbell Surveys.   It's worth your time if you are at all involved in listing or selling Short Sales.

SEE: 

THE SHORT SALE GAME??  Take notice of the title of the Survey, "Understanding the New Rules of the Short Sale GAME". 

Some of the "rules" of the Short Sale GAME as determined by Wells Fargo, Bank of America, et al. include:

  • 1.  Portfolio held mortgages will close far faster than those mortgages, first or seconds, held by investors including Fannie Mae and Freddie Mac.   Wells Fargo claims a 37 day start to finish short sale approval for portfolio borrowers.

  • 2.  Real estate commissions are treated more favorably when the listing agent lists and markets the property as a regular sale, meaning market value of regular home owner sales (excluding bank owned).

  • 3.  The lenders are looking for "market offers" and expect the short sale listings to be competitive with regular home owner listings.

 

  • 4.  Home buyers who are approved by Wells Fargo Mortgage will have a competitive advantage if they finance their purchase with Wells Fargo.  With these major bank players, buyer's agents might as well get used to this practice if they are not already.  We've seen this practice with Bank of America and Wells Fargo in our market for some years now.

GET READY FOR "EQUATOR".  Beginning on page 36 of the Survey, you'll be introduced to a new tracking system being implemented to manage Short Sales for the lender.   IF, and it is a big IF, the lenders use and update this tracking system timely, it could be a helpful tool for listing agents.  Anything will be an improvement over the many hours that listing agents spend on the phone trying to get status of Short Sale contracts. 

All in all, the conference was interesting, although from start to finish, other than the promise of Equator, I heard little that will expedite approvals if there are investors involved.  What I did get from the participants was:

  • Portfolio loans will receive approval faster than investor held loans.
  • Lenders are going to be seeking "market value" for the properties.
  • Lenders are going to use their position to attempt to finance short sale buyers.
  • Lenders will support agents commissions as agreed if the listing agents market the properties aggressively.
  • Lenders do not consider Short Sales to be "distressed listings".
  • Short Sales are complicated by many diverse interests and lenders.
  • Fannie and Freddie have no viable programs to help home owners keep their homes.

The Live Audio Conference - New Government Short Sale Program, was sponsored by the Dulles Area Association of Realtors ("DAAR").   Not a week goes by without opportunities for well presented and managed seminars, luncheon meetings with speakers from our local real estate market ara.   DAAR is a small local board devoted to LOUDOUN COUNTY REALTORS.  DAAR is are staffed by friendly and helpful folks and offers a wealth of CE and other resources to help Loudoun County Realtors be the best that we can be to serve the home buying and selling consumer. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.

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Re-Blogged 18 times:

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  1. Carla Muss-Jacobs, RETIRED 02/23/2010 05:35 AM
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Rainer
19,056
Johnny Sabic
www.atlantamyhome.com - North Atlanta, GA
Atlanta Real Estate

Thank you for posting Lenn, this is very good info

Feb 27, 2010 01:27 PM #87
Rainmaker
1,080,029
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

3.  The lenders are looking for "market offers" and expect the short sale listings to be competitive with regular home owner listings.

What's wrong with this picture? The threat of foreclosure's ticking clock demand that short sales be reduced below market value and regular home owner listings. We begin our short sale listings at or near market value if the home is in good shape, but we must reduce them as time goes by just to get an offer to stop the foreclosure process. Not every Buyer is willing to wait. The ones who are expect a deal.

The banks say these are not 'distressed' properties? The Sellers certainly are distressed. The time frame certainly is distressed. The Buyers are distressed waiting for months on end without even knowing whether the house will ever be theirs. Even the Listing Agents get a dose of 'distressed' with the time and effort it takes to bring many of these to the closing table.

It sounds as though the banks are making a feeble effort to stop the slide of home values by boosting short sales back into the 'normal sale' category. This makes sense on the surface, since in many markets, short sales are the market. At least they are what's selling.

The disconnect here is the time frame and the fact that short sale properties often fall into a state of distress as time goes on and owners vacate or just stop caring about appearances.

I think I'm going to blog about this :)

 

Feb 27, 2010 02:24 PM #88
Rainmaker
222,108
Jirius Isaac
Isaac Real Estate &TriStar Mortgage - Kenmore, WA
Real Estate & loans in Kenmore, WA

I have 5 active listings and 3 of them are short sales.  That is mostly what I am showing as well.

Feb 27, 2010 03:20 PM #89
Ambassador
1,091,244
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

I'm going to read over that whole thing....your points will help guide me as well...

Feb 27, 2010 03:32 PM #90
Rainer
31,350
George Wilson
Lincolnton, NC - Lincolnton, NC

Thanks for the post on SS. They are starting to pickup here, too. My associate says the long lead time to bank response is a big no starter for several of her buyers & investors so hopefully this new system will reduce the time frame and maybe more buyers will consider them. I'll book mark the report to read in full later and with your permission I'll send my associate a link to this post for her to read. Another issue to buyers dealing with SS we see is the "late fee" for not closing on time when the problem stems from the time for bank to respond to offer or when a problem that shows up during an inspection required by the loaning bank (i.e. biological testing of well water by county environmental health) that has to be "repaired" prior to final loan approval.

Feb 27, 2010 04:02 PM #91
Rainmaker
166,473
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

I'm not a realtor so don't need to understand all this stuff, thankfully. What I can share are just my thoughts as a somewhat educated consumer on the sidelines:

  • The banks have been purposely holding onto their properties ... I believe, to make the situation bad enough that the government finally agreed to subsidize more of their losses, i.e. they aren't losing money as government (we) are subsiziding everything. Now they've gotten what they want so they'll slowly unload their inventory.
  • Based on personal experience, I'll never finance with Wells Fargo again, and probably no bank who requires a deposit up front towards closing costs, in my case $1,000 to Wells Fargo. Letter to WF president did get this refunded.
  • Wells Fargo employee falsified my application, omitting my Nantucket rental property. Invented rental income for home I was leaving but had no intention of renting, would stage & list for sale.
  • Things got worse. Goal wass to close in 30 days, i.e. went with WF in first place as they'd done only recent closing in condo complex. Monday the WF guy says we can't close that week as I don't have 3 things (1 his rental doc) in ... and I guess there was an argument about whether property was in flood zone (my neighbor saved over $2,000 after I was done with this one).
  • After WF call Monday, called my old mortgage guy - he was changing jobs to GMAC and while he didn't work there yet, got verbal GMAC approval Tuesday, written approval Wednesday (I was in a hotel 2500 miles away, on business) and closed Friday. We always do power of attorney so only one of us has to go to silly closings, or sometimes do entire thing via mail. We bought our first 2 homes in CA where there are NO closings, you just go into title company & sign your paperwork.
  • Can't imagine how WF came out of this fiasco in good shape as they were scamming the system as much as anyone based on my experience.
Feb 27, 2010 11:31 PM #92
Rainmaker
166,473
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

...oops, I forgot to include in comments above

Appraisal was TOTAL SCAM

Honestly, have you ever seen comps pulled from 15 miles away, crossing 3 town lines. I knew what the market value for our condo was, and I knew I was paying over this. Not sure what I would have done if I'd gotten an honest appraisal, but at least I knewo more than the unscrupulous appraiser, mortgage broker ... and I wasn't fooled.

 

Feb 27, 2010 11:42 PM #93
Rainmaker
911,289
Kay Van Kampen
RE/MAX Broker, RE/MAX - Springfield, MO
Realtor®, Springfield Mo Real Estate

Lenn, I listened to the same audio conference.  I've listed 3 more short sales this week and I don't see an end to it for a long time.  I wil say I'll have to hire another agent just to help start calling the banks.  It's becoming overwhelming.

Feb 28, 2010 12:35 AM #94
Rainmaker
323,845
Melissa Brown
Helen Adams Realty - Charlotte, NC
Realtor - South Charlotte NC Homes for Sale

Lenn, thanks for uploading the documents in your post.  I found a lot of useful information in them.

My take after reading the "game plan" is to hope that my deals involve Wells Fargo and not B of A.  I think one the biggest factors in the snail's pace of short sales is banks not order an APPRAISAL up front.  BPOs are often not worth the paper they are written on.  If the listing agent/bank had an accurate appraisal upfront, the "fair market value" could be more of a factor in the list price.  I'm glad to see that Wells is ordering appraisals up front.

Did they say anything about how the banks factor in  the costs of repairs?  I have a buyer who is interested in a short sale in a very nice neighborhood, but it needs about $100,000 in repairs just to make it livable.  The current list price doesn't reflect this need for repairs.  If we come in with an offer that reflects this $100,000 need for repairs, will the bank just reject our offer out of hand because it is so low?  PS  The listing agent hasn't done a short sale yet.

Comments from any and all would be welcome!

Feb 28, 2010 12:37 AM #95
Rainer
9,479
Catherine Kierzek
ReMax Lakeside - Muskego, WI
CDPE

Great information.   I am CDPE certified but the buyers I've been working with seem to not want to take a chance with the short sales because they may not close in time for the tax credits from what they are hearing from their friends.  I'm hearing some are closing quickly like 45 days, and others 6-8 months.  It was interesting that they want the realtors to comp short sales with regular sales and no foreclosures to bring the price down like I think some realtors around here are doing to get the buyer to write. 

Feb 28, 2010 09:03 AM #96
Rainmaker
926,467
Ann Hayden 636-399-7544
Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Chesterfield, MO
SelectAnn.com

Lenn,

So far what I have found is you will wait and wait and wait some more and then get tired of waiting and move on....

Ann Hayden in Wildwood, MO

Feb 28, 2010 03:08 PM #97
Rainer
8,148
Diana Cessna
Effective Technical Group, LLC - Tampa, FL

Joe #23:  I'm glad someone brought up Agency and Representation.

When we're working as a Buyers' Agent, our responsibility is to the Buyer.  When the Banks are "encouraging" us to have our Buyers approved for a mortgage by them, it breaches the confidentiality of our relationship with our client.  This is happening in Short Sales and REOs.  I wish everyone would stop to think about the repercussion of disclosing all of your Buyers financial capabilities to the Seller.  I am against this when Banks or Builders do it.  A Buyer should not be required to do their mortgage with the Seller's Bank.   The Seller needs only to know that a Buyer is approved for the offer presented and be provided with a loan commitment within the time parameters set in the contract. 

On top of the enormous disadvantage this puts buyers in with their negotiations, it also limits them from being able to shop around for the best mortgage.  There is so much new regulation that is intended to protect the buyer that completely misses the mark.  The bank lobby is strong.  When regulation was proceeding to prohibit sellers from dictating which bank a buyer uses, it fell through.  The buyers are forced to use the sellers bank even though they could get a better rate and service and much quicker processing and closing from other lending sources. 

We, as Realtors, are allowing this because we are doing what the banks want in order to get a deal closed.  Is our fiduciary responsibility to the bank or the buyer?  What the banks are doing is wrong.  It's bad for the market and it's bad for the consumer. 

 

 

 

 

 

Mar 01, 2010 01:13 AM #98
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Melissa.  They were quite clear that the homes are sold "as is" as in foreclosure style with no repairs.  That said, if it's a short sale and the bank would agree, a 203(k) should be possible but I don't know anyone who has even tried that with a short sale.  I know I wouldn't.

 

 

Mar 01, 2010 02:30 AM #99
Rainmaker
500,669
Terry McCarley
REMAX Realty Team - Cape Coral FL - Cape Coral, FL
REALTOR, SRES, CDPE - Cape Coral, FL

Thanks so much for this post!  I wanted to participate in this but had to be at a closing so you posting this info helped me a great deal!

Mar 01, 2010 03:05 AM #100
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2,743,836
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

DIANE:

HOW??  What is "confidential about a Buyer's financial ability to buy a property??

When a buyer makes an offer on any property anytime, that seller has the right to know that the buyer is qualified, and how qualified.  Even with a fully approved loan, which you're not going to get with offers, I want to see a Buyer's Financial Statement. 

One of the reasons so many contracts fall apart close to the closing date is because the Buyer, the Seller, the Listing Agent and the Buyer's Agent are all relying on a letter from a mortgage loan officer that the Buyer is "qualified" or "APPROVED".  There is usually insufficient financial information for a Listing Agent to determine the qualifications of the Buyer beyond a general statement.  There is, for the past several years in my experience, few financial details about the Buyer's actual financial profile and ability to close. 

Diane believes that providing a Seller with the financial profile of a prospective home Buyer breaches the Buyer's Agent's fiduciary duty of confidentiality. 

I DISAGREE.

Confidentiality is not a factor in establishing the Buyer's ability to close.  Further, by not providing the Buyers financial ability to close, is the Buyer's agent presenting a picture of financial weakness??

What is "confidential" about showing the buyer is qualified??  You're not telling the seller or the bank how high they are willing to go.  You're not telling the bank why they are motivated to buy that home.

By not proving the buyer is qualified, you're asking the seller to take a PIG IN A POKE and the bank to approve it

If that buyer makes a loan application with the Seller's lender who must approve the Short Sale, that buyer will have about a (estimated) 50% increased chance of getting the contract approved. 

Knowing how much a buyer is qualified for doesn't establish how much they are willing to pay.  A buyer can be qualified for a $1,000,000 but only willing to pay $300,000 for a particular property.

We have been very successful negtiating from STRENGTH.  Beats out the competition every time.

Mmmmmm.  I think I have fodder for a post.

 

Mar 01, 2010 03:37 AM #101
Rainer
135,682
Matt Robinson
Professional Investors Guild - Pensacola, FL
www.professionalinvestorsguild.com

I think it's silly that some banks still don't consider short sales as "distressed".  The condition is usually poor due to the fact that the owner no longer sees it as their house, but rather as the banks.  Additionally, those who fear foreclosure will do just about anything to sell in order to keep that scarlet letter off their credit.  Does that sound like a normal sale to you?

May 30, 2010 10:32 AM #102
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Matt.  Indeed.  That statement from the BoA and WF reps that they are proceeding with SS approvals on the position that they are NOT distressed sales was one of the most surprising pieces of info of the day.

May 30, 2010 11:25 PM #103
Rainmaker
166,473
Tina Gleisner
Home Tips for Women - Portsmouth, NH
Home Tips for Women

I continue to get educated, and disgusted at the same time, by the unfair tactics of the financial institutions. I for one will never do business with Wells Fargo again. One of their loan guys falsified my application and I successfully uplled the plug, closing with GMAC 4 days after my first call to them ... although this was 2006 and probably would never happen again.

Jun 13, 2010 12:22 AM #104
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Tina.  Interesting.  We learn about these financial institutions long after they have caused so much damage.

Jun 13, 2010 12:25 AM #105
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