All of these conversations have dealt with banks not holding up their end of the process. Frustrations abound from both consumers and professionals when dealing with banks and loan service companies It occurred to me that the banks are the wrench in the spokes of any kind of recovery.
Here are some examples:
1. An REO property that's been on the market for months. There are currently three offers on the property, none of which have been responded to, at least one of which will expire in three days time.
2. Short Sale - two offers on the table, no response from the bank, communication has stopped. Real Estate Agents, Homeowner and Buyer are all disgusted.
3. Homeowner, not yet in default, wanting to modify their loan who can't through through the first line of defense with the bank. Many homes are lost to short sale or foreclosure because of this.
4. Banks cutting Real Estate Agents commissions at the 11th hour and not dealing in good faith.
5. Some Real Estate Agents refusing to show properties listed as a Short Sale because of the complications, time involvement and potential loss of income. I'm hearing that many would rather wait for the house to hit foreclosure status.
6. The news media reporting that banks don't trust other banks, thus hurting overall liquidity.
To get through this market, the machinery must be well tuned and all the gears much be turning together It is inexcusable for banks to have offers on the table and not respond to them. Reality is that for a recovery of any type to take place, inventory must be diminished and time on market must be shortened. Consumer confidence must return which will then drive employment and other positive economic factors.
Here are my recommendations:
1. Hire experienced employees at the front line to deal with homeowners. Empower these employees to think and make decisions. At a minimum empower them to get the process started.
2. Deal in good faith, pay the Agent working on the front line for their hard work.
3. Respond to offers in a timely manner. In the real world we are given 48 - 72 hours to respond to an offer. Banks need to establish these policies or something similar. Taking 30 or more days to respond an offer is inexcusable.
4. Be proactive - if a loan is scheduled to recast, automatically extend the terms for another 3 - 5 years. Don't wait for the consumer to contact you. The consumer is embarrassed and afraid of dealing with the bank, make it easy.
5. Establish policies that will put fewer homes into short sale or foreclosure status. When someone sends in a Short Sale package, ask the question: What will it take to keep you in your home? Can we modify the loan instead? What do we need to modify it to? How can we help you keep your home?
6. Forget short term profitability and take a long term view. The faster we move through the inventory the quicker the banks balance sheets and market liquidity will recover.
By implementing these kinds of strategies, fewer homes would go into short sale or foreclosure, the market will stabilize more quickly. Both inventory and time on market will decrease, home prices will stabilize and the consumer confidence will significantly improve.
Keeping people in their homes and moving inventory should be a top priority. Tent cities are not a long term option or solution!