As the Phoenix valley real estate market continues to deteriorate and more and more properties hit the market as REOs, also known as Foreclosures, property values continue to plummet. On Tuesday, November 25th, Adam Kres, reporter for the Phoenix Business Journal wrote " Home prices continue to plummet across the country, and Phoenix is leading the way. According to the S&P Case-Shiller Home Price Index, values in the Phoenix metro area are down nearly 32 percent compared with third-quarter numbers of 2007. Kress went on to write… of all cities in the national index, Phoenix posted the biggest loss in home values..."
It is time for short sale loss mitigation specialists to step to the plate and offer more in the way of cooperation with sellers who are in financial distress. The information shared in this video will better inform loss mitigation negotiators, their employers, investors and MI Company that in most cases when an offer is presented at market value or above, it is in the lender’s best interest and in the best interest of their investor and MI Company’s to accept the offer that has been presented.
In nearly every instance the seller has made it perfectly clear to their lender, or lenders, that the seller is in no position to repay any portion of the deficit that will be realized from the short sale of their home. As long as the prospective buyers are well qualified and ready to close on the property within 20 to 30 days, or less, of an agreement from seller’s lender to approve this Short Sale, current market conditions strongly suggest that the short sale should be approved by all factions within the seller’s lender’s collective of decision makers.
The following are examples of the potential financial devastation that awaits a lender who fails to work toward an amicable short sale closing. The following examples are consistent with the tenor of the Phoenix real estate market and I would suggest that this scenario will play out over and over again across the country.
In our first example, a property comparable to a current short sale listing, located on Mary Jane LN in Glendale Arizona was listed as a short sale between the months of November 2007 through the end of January 2008 for a list price between $200,000 & $197,500. All short sale negotiations failed with the lender, Countrywide Home Loans. Countrywide subsequently foreclosed on this property. After the foreclosure process Countrywide listed the property with a local brokerage and sold the property, as a REO for $144,000, a 27% loss in potential captured revenue. Had Countrywide agreed to the short sale offered months earlier, Countrywide could have sold the home for $53,000 more.
A second example is another comparable property located at on 56th Avenue in Glendale Arizona. The property was listed as a short sale between the months of October 2007 through the end of May 2008 for a list price between $216,000 & $205,000. Again, all short sale negotiations failed with the lender… this time Citi Mortgage. Citi Mortgage later foreclosed on this property. Again, after the foreclosure process, Citi Mortgage listed this property with a local brokerage and sold the property, as a REO for $157,250, a net loss of 23% of potential captured revenue. Had Citi Mortgage agreed to the short sale offered, months earlier, Citi Mortgage could have sold the home for nearly $50,000 more.
In both examples, these figure do not account for any additional costs to Countrywide Home Loans or Citi Mortgage and their investors, such as the cost of the foreclosure procedure, possible eviction action of the owners, tenants or vagrant squatters, loss prevention and security, maintenance, repairs, H.O.A. dues, cost of sale and other internal fees that impacted reserves required under federal banking regulations to be maintained by Countrywide and Citi Mortgage and possibly their investors. Countrywide and Citi squandered an opportunity to resolve the state of the owner’s home loans.
Such misgivings of logic are exactly the kinds of events that continue to sustain the downward spiral of property values in Phoenix and across the nation.
Real estate market conditions continue to deteriorate. Phoenix leads the nation in declining values. As I noted in the beginning of this video, between the third quarter of 2007 and the third quarter of 2008, property values plummeted 32%. Every month a property valued at $160,000 remains UNSOLD, the value declines an additional 2% or about $3,200.
Loss mitigation specialists and their employing lenders have an opportunity to eliminate the need to expend additional funds on foreclosure procedures, possible eviction action of vagrant occupants, loss prevention and security, maintenance, additional repairs, unpaid H.O.A. dues and fines, city and local municipality fines, cost of sale and other internal fees that could impact the lender’s reserves required under federal banking regulations to be maintained. Short Sale offers provide a chance for the lenders to resolve the current state of the owner’s home loan and mitigate their financial damages.
If lenders fail to complete successful Short Sale transactions between potential buyers and seller in distress but choose rather to execute their foreclosure rights, the lenders will participate in a very factual reality of real estate market dynamics. Here in Maricopa County REO properties tend to be listed below actual market value, statistically selling for up to 24% less than market value while Short Sale properties can sell for as much as full market value with minimal discounts below that point.
It is important that every realtor who is aggressively working with short sale listings take time to demonstrate these very real numbers to the banks loss mitigation negotiators they interact with.
G-II is one half of Lori & G-II’s eTeam of Professional REALTORS® with Coldwell Banker Residential Brokerage. Lori & G-II are Short Sale Specialist in Maricopa County Arizona. If you are a seller, in need of short sale assistance, please feel free to contact us at 602.796-5674 or eMail us at Lori.and.G-II@RealEstateInPhoenix.net for additional information about the Short Sale process.
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