A New Type of Short Sale Seller is on the Horizon

By
Real Estate Agent with RE/MAX Gold DRE #00697006

short sale sacramentoThe buzz in the industry seems to be mostly about foreclosures in Sacramento. People are talking about the shadow inventory, wondering what happened and when we'll see it hit the market. As the Sacramento Bee reported yesterday, foreclosures are falling. But short sales in Sacramento are on the rise. Almost one in four closed sales in Sacramento is a short sale. That's not to say, however, that short sales are replacing foreclosures.

I see three things going on. First, I'm getting short sale approval on some of my really old files. Buyers who have been patiently waiting since last summer are now going into escrow. My new short sales, especially those with Bank of America, are getting approved much faster, some in fewer than 30 days from submission to Equator.

Second, banks are selling foreclosures either privately in bulk or at the courthouse steps to investors. More flipper homes are showing up in MLS. Investors are purchasing these homes at incredible discounts from the banks, fixing them up and putting them back on the market. It makes sense because the banks get them off their books, and first-time home buyers generally do not have the money nor the expertise to restore some of these homes to livable conditions.

Third, I predict we'll start to see more Alternate-A and A-Paper loans going to short sale. These are the sellers who are tired of getting the short end of the stick. They're underwater and nobody is helping them. These sellers enjoy high FICO scores, pay their bills and are not in default. But many of them don't want to continue paying for a home that is worth less than what they owe. They see that sellers with subprime mortgages received a free ride and the banks let those guys off the hook. They're gonna start saying, "What about me? What do I get?"

The problem, of course, is qualifying for a short sale. Some of these sellers have little or no hardship. But it doesn't mean they can't do a short sale. Banks approve short sales for sellers with assets and disposable income; they grant short sales by asking for a seller contribution under those circumstances. That amount is negotiated. A bank might ask for 10% of the principal balance, and we might settle somewhere around 10% of that amount. It's not the end of the world and it offers a way out.

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elizabeth weintraub

 

 

Weintraub and Wallace Realtors

 

 

Elizabeth Weintraub reviews

 

 

 

Elizabeth Weintraub is co-partner of Weintraub & Wallace Team of Top Producing Realtors, an author, home buying expert at The Balance, a Land Park resident, and a veteran real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown, Carmichael and East Sacramento, as well as tract homes in Elk Grove, Natomas, Roseville and Lincoln. Call Elizabeth Weintraub at 916.233.6759. Put our combined 80 years of real estate experience to work for you. Broker-Associate at RE/MAX Gold. DRE License # 00697006.

Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.The views expressed herein are Weintraub's personal views and do not reflect the views of RE/MAX Gold. Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice; it could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.

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California Sacramento County Sacramento
Groups:
California Short Sales, REO's, and Foreclosures
Posts to Localism
Short Sales Specialists
Lyon Realtors
Club Chaos
Tags:
foreclosures
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short sale approval
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bank of america short sales
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Rainer
141,810
James Baxter Encinitas Realtor
Realty Place - Encinitas, CA

Hi Elizabeth,

Great post... this is what we are experiencing down to the south of you in San Diego. It will be interesting to see how the next few years go! All I got to say is agent better embrace the short sale!

 

J

Apr 22, 2010 02:15 AM #1
Rainmaker
335,091
Lori Churchill Cofer
Beasley Realty - Pullman, WA
Realtor - 509-330-0086 - Pullman, WA

Elizabeth,

I always enjoy reading your expertise in Short Sales.....

Apr 22, 2010 02:19 AM #2
Rainmaker
685,225
Cynthia Larsen
Cotati, CA
Independent Broker In Sonoma County, CA

Our paper reported that our (Sonoma County) foreclosures for the first quarter 2010 are up 18% from the first quarter 2009.  (496 foreclosures vs. 421).  Yet the NOD numbers are slightly down.  It would be nice to know if any of these foreclosures or NOD's are hitting folks who successfully modified their loan and still can't afford their mortgage.

Apr 22, 2010 02:53 AM #3
Ambassador
2,860,502
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

I completely understand the "what about me?" and "why are they getting a free ride?" attitude.  Frankly, I've said those words myself.  I lost equity and I'm still making my mortgage payment.  My business (the actual office) lost equity and I'm still making those mortgage payments.  Of course I don't plan to short sale either, I'll just keep plugging away until the value returns and hopefully when I reach my desired retirement age I can liquidate for a profit and hit the road.

Apr 22, 2010 04:28 AM #4
Ambassador
1,721,152
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Elizabeth,

I sometimes get a feeling that the whole short sale thing may not be with us for long if the market starts heating up fast enough, so that the values go up and get many from being underwater to market values, so that there could be regular sales even if the Seller will be simply walking away without a penny, but with clean record if they have been paying, and with no judgments and IRS taxes, if they didn't

Apr 22, 2010 05:16 AM #5
Rainmaker
565,518
Mike Saunders
Lanier Partners - Athens, GA

Elizabeth - as usual, I learn something almost every time I read one of your posts. So far we have not had a lot of those "what about me" short sales in this area. I hope we really don't see too many.

Apr 22, 2010 06:04 AM #6
Rainer
112,087
Cari Anderson
Danville, CA

Elizabeth: great info as always. I'm hearing good things too about B of A and Equator. I wonder what the investor flipped properties are averaging above the REO price. The FHA flip waiver does not permit for the investor to make much of a profit (under 20%) if the new buyer wants to use FHA financing. If the investor lists 20% over the original price, the FHA guidelines get sticky and none of our investors are playing that game. With the lower-end properties, that doesn't give much room.

Apr 22, 2010 06:32 AM #7
Ambassador
3,084,995
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Elizabeth:  Met a very out of the loop appraiser who had been in the business for ages.  She went on and on about how many foreclosures are coming our way, etc.  EVery agent in the room (it was a class) nearly laughed out loud.  Where are they?  We're ready!  We have no inventory.  Short sales really have replaced foreclosures in our market.  They make sense for everyone.  And I think you are 100% right about the A loans getting feed up and walking away in a short sale.

Apr 22, 2010 11:01 AM #8
Ambassador
3,084,995
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Elizabeth:  Met a very out of the loop appraiser who had been in the business for ages.  She went on and on about how many foreclosures are coming our way, etc.  EVery agent in the room (it was a class) nearly laughed out loud.  Where are they?  We're ready!  We have no inventory.  Short sales really have replaced foreclosures in our market.  They make sense for everyone.  And I think you are 100% right about the A loans getting feed up and walking away in a short sale.

Apr 22, 2010 11:01 AM #9
Ambassador
1,893,084
Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

Elizabeth-I'm already seeing the beginnings of this happening in areas that I work.  Owners who have watched the bailouts and or their neigbhors complete short sales and then buy down the street at 1/2 price.  They are fed up and are moving on.  It will be interesting to see what the lenders will do.

Apr 22, 2010 11:24 AM #10
Rainmaker
298,297
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor

Elizabeth,
amazing blog, hopefully BOA and other lenders with the HAFA and the new improvements will make better for all, take care !

 

Apr 22, 2010 04:18 PM #11
Rainer
387,459
Doug Anderson
Tucker Associates Real Estate Services - Danville, CA
Bay Area Real Estate Views

Elizabeth - Terrific information.  As I have heard in the past in CA that it starts inland and moves toward the coast.  We have alot in front of us and there is going to be a large increase in short sales in the near term and extending out several quarters . ~ Doug

Apr 22, 2010 04:50 PM #12
Rainmaker
601,332
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Elizabeth - Seeing those things down here too, especially the newly flipped.  Just went into escrow on one where the sales price is significantly higher than the acquisition price less than 90 days ago.  Like Cari mentioned, this is an issue with FHA and I have some concerns about this escrow starting with the two appraisals and reviews.

The LA assures us that the sellers (LLC) have documentation of all the repairs, including the payment of considerable amounts of liens and bldg code violations.  My lending source tells me this may be enough to approve the loan but this scenario is still relatively new and I can't help but feel like my clients and I are some kind of guinea pigs.

My guess is that this LLC purchased a bulk of properties at rock bottom prices because the properties were absolute dogs that no one would buy.  I strongly suspect that we are going to start seeing a lot more of this from here on out.  Hold on folks, it's going to get interesting.

Apr 22, 2010 05:35 PM #13
Rainmaker
756,114
Adam Malachi
A 2 Z Realty LLC - Castle Rock, CO
QSC,CDPE,CIPS,CNE,CRB,CRS,GRI,MRE,SFR

Good post! Very good information's on short sale!

Thanks for sharing.

Adam,

Apr 23, 2010 02:22 PM #14
Rainmaker
126,231
David Dee
RMX REALTY - Alhambra, CA
Real Estate - San Gabriel Valley (L.A.) & N. Orang

Elizabeth, very interesting forecast and it may well come to fruition. With the subprimes out of the way, the alt-A and A papers are bound to be next as it may not make financial sense for some to keep paying high while others have taken a free ride.

Apr 23, 2010 05:37 PM #15
Rainmaker
2,189,557
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

Regarding those FHA guidelines, I've closed a few sales on flippers but they were all a struggle. The less buyers put down, the harder to close.

As for the A-paper short sale sellers, I've got a few of those as well. I'm always looking for trends to report. It seems to be where many of my short sale sellers are coming from, among those who were rejected for loan modifications.

sacramento short sale agent

Apr 24, 2010 01:32 AM #16
Rainmaker
161,892
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Elizabeth, I have already done and still doing the "What about me" sellers. They, and the people who lost their jobs (that do not want forbearance agreements), are my new short sale clients. No more 80/20 loans and the Neg ARM loans are almost dried up because they already did a short sale or they were offered a loan modification.

Also, I don't see the shadow inventory. I have no Idea what Realty Trac is reporting (along with the media). The properties I've seen get foreclosed on do come up as REOs.

Regarding Trustee sales in California. Did you know that you can pick them up at a Trustee's sale at a discount bid? I always thought that they go by credit bids, which were almost always higher than current market value. However the latest trend is to pick them up at trustee's sales at a discount bid, fix them up and sell them on the MLS.

Great blog. Thanks for taking the time to write it. It's as if you are describing my area as well.

Apr 24, 2010 06:45 AM #17
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