My business partner and I know have about $2 million in total volume of short sale properties pending approval from the respective lenders. Now multiply that times the number of hard working real estate agents left standing across the country and you can see why our financial markets are mess. Credit freeze?! Liquidity problems?! Well get ready folks because here comes another one of my rants against the banks and how their operations have led to this mess and continue to prolong the misery.
First of all if Capitol Hill had consulted with Realtors regarding this problem I think we would have been able to develop a solution that would have been better than the one at hand. The problem we have is a real estate problem. Caused by the down turn in the real estate market. So why not ask those who are on the front line, the experts in real estate, what we think a good solution might have been.
My suggestion would have been to infuse the banks with capital yes, but part of that capital would be put to use in staffing up their loss mitigation departments, R.E.O. departments, and rehabbing their R.E.O. properties. This would have a two fold affect. #1 it would get more homes sold and off the market, #2 it would create jobs.
The answer we get from lenders as to why short sales take so long is that they are understaffed. The loss mitigation departments are overwhelmed with hundreds of files sitting on each processor's desk. The answer of course would be to staff up. But they don't want to because that would mean spending more money on a department that in essence loses money. But I argue that this is a grave disservice to these financial institutions shareholders AND the investors that backed these loans. Many of us have experienced the short sale that never was because it slipped into foreclosure before we ever got an answer. Is that fair to the shareholders and the aforementioned investors? I think not. The banks need to increase staff to get these short sales through.
Now I've also heard that it's difficult for these banks to get approval from the investors backing the original loan. My answer to that would be that the banks need to take a more proactive role in that respect and notify the investors that hey, we can get you 65-70 cents on your dollar by closing this short sale or we can give you 45-50 cents on your dollar if we have to take the home back through foreclosure. I think most investors understand what's going on in the markets at this point to understand that taking choice A is the only viable option. Plus, these "assets" are non-performing. It's like the banks have billions, nay trillions of dollars tucked away under their mattresses not earning any money. By getting these homes sold and off their books and receiving the infusion of cash the home sales would bring we could get that money circulating in the system again. Because when all is said and done their business is to lend money.
The other aspect of this plan would stimulate the economy as a whole by creating more jobs. The banks would be hiring more staff not only for their loss mitigation departments but also tradespeople to rehab their R.E.O. properties. One of the many reasons this housing down turn has taken the economy down with it is the far reaching effect of the housing market on other ancillary industries. Carpet layers, painters, pool installers, tile guys, cabinet makers have all felt the pinch as well. If we get these people working again by rehabbing the R.E.O. properties it will have a profound effect on the economy.
And lastly, real estate agents will make more money too. I know that sounds self serving, but here's why I say that. We, real estate agents, are at the top of the food chain in the real estate market. If we're not making money, nobody's making money. By increasing our business it increases the business of title companies, inspectors, lenders, tradespeople, restaurants (does anyone still clients out to lunch/dinner anymore?), etc.
That's my two cents. I'll stand by these suggestions. Feel free to comment.
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