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

Thank you for posting Lenn, this is very good info

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 :)

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

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

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.

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.

...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.

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.

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!

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. 

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

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. 

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!

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?

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.