"Why do short sales takes so long?" I get asked that all the time! "Doesn't the bank see that if they foreclose they will lose more money?"
Well- will they?
We have been in this depression now for a good four years. I have heard the banks time and time again say that they are trying to "ramp-up" their short sale departments. They are trying to expedite the time frames. Then why does it still take 90 days, in most cases, just to get them to verify they have it and they are in process? That does not seem expedited to me.
I am not a scholar or an economic analyst (if you know me you certainly know that to be the truth!)but there are two things I know about banks:
1) In EVERYTHING they do-they make money.
2) They do not do anything...ANYTHING...that loses them money.
I mean, they're a bank! If short sales were greatly more beneficial for the banks in the short or long term, you could bet they would have ramped up. They are the most profitable industry in the world! If short sales worked in their balance sheets we would see them calling homeowners to market short sales! You would be inundated with junk mail and spams and people at the counter saying "Mr. So and So, I just wanted to let you know of our excellent expedited Short Sale program we offering..."
Yet here is what is actually happening: Foreclosures are on the rise.
I am actually a bit insulted by the whole thing as short sales and loan modifications seem like a lot of pandering to the public to me. 4% of loan modifications are actually granted- and that is usually to people who could otherwise qualify to refinance. I have done numerous short sales, and I can't imagine that a 120 day, 270 day or 360 day closing cycle, when you think of bank employee costs, filing costs, etc, is lucrative. The HAMP Program was supposed to help rectify this problem, but it did not actually accomplish much:
We saw this in the credit card industry with the "Credit Card Reform" legislation. It was marketed in a way that made consumers feel that their rates would go down, they wouldn't be charged usury for being a day late, and their rates couldn't be randomly changed at the whim of the card company. What it actually provided for was that certain terms that may appear on page 27 of your contract, such as "...subject to change at anytime by card issuer's discretion" is now on page 24. Well- they did make sure it is in bold print.
OK. That is an editorial comment, but here is an article that shows the effectiveness, or potential lack thereof, of this law:
You have got to read question 2 in the Q&A. Like I said, They do not do anything...ANYTHING...that loses them money.
I have figured there is some way that foreclosing on properties and keeping short sales long and arduous works in their favor. Maybe even if it is keeping their quarterlies down so as not to have to pay so much back to the government- check this out:
Who knows? But something is going on. Whether it is an issue with market control, or long term loss mitigation, I do not buy that they are still just "understaffed". I was doing some research in our area on Short Sales and distressed properties and what percentage of the market they are. Here are some statistics based off of Trulia stats:
There are currently 2,623 resale and new homes in Seattle, WA on Trulia, including 66 open houses, as well as 1,953 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process.
There are currently 481 resale and new homes in Marysville, WA on Trulia, including 2 open houses, as well as 478 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. Kent, WA: 55.1% of homes for sale are distressed
There are currently 626 resale and new homes in Kent, WA on Trulia, including 769 homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process.
What this means is that the conglomeration of banks- so, basically, the banking industry, will own or control the market time of upwards of 50% of the market at any given time!
I am not a conspiracy theorist by any means. I know that the moon landing was staged on a movie set in Hollywood.
I mean, if you look real hard, the flag is blowing in the wind... There is no wind on the moon! And you can very faintly see the seam for the set background.
I am kidding, of course.
Let me know what you think.
Maybe we will get a banker to chime in?
"Listen Here, Mr. Potter...."