This is a great article posted by Inman News about the Short Sale process and the efforts being made to shorten time frames….Realtors ramp up call for standards!!!!!!
By Gilbert Mohtes-Chan, Thursday, May 7, 2009.
Inman News
All too often, short sales are really l-o-o-n-g sales — it can take many weeks and months to close a deal.
And patience is increasingly wearing thin across the country as real estate agents become more vocal over the agonizing process. They argue that clearing the nation’s huge inventory of distressed properties is paramount to resuscitate an ailing housing market and sputtering U.S. economy.
A year after sounding off over the problems, Realtors are ramping up a campaign to prod the lending and mortgage servicing industries to embrace universal standards and procedures to streamline the short-sale process. Those include a uniform short-sale application and an online listing of people who service short-sale transactions.
If that doesn’t work, some are threatening to take their case to the White House and ask the Obama administration to convene a special task force.
A call to action
“It’s a disaster. It’s takes forever (to close a short sale). It’s unfair to the buyer and it’s unfair to the seller,” said George K. Wonica, a veteran Staten Island, N.Y., Realtor and chairman of the Nation Association of Realtors’ Conventional Finance and Lending Committee. “NAR has to exercise its power and its pressure to get people to the table.”
Interviews with real estate agents from some of the hardest-hit markets in California, Michigan, Arizona, Nevada and Florida found a bevy of complaints still persist. While banks have cut down the number of days they take to respond to short-sale offers, they also report that communications with lenders remain spotty.
“We’re seeing so many short sales that never come to a close. We have banks dictating how things are done. It has really become the Wild West out here,” said Suzanne Sherer, president of the Realtor Association of Greater Fort Myers (Florida) and the Beach, which represents one of the nation’s most distressed housing markets. “We need some sort of legislation to protect buyers.”
Wonica vows to become more proactive.
In February, Wonica huddled with 10 mortgage bankers and servicers in Florida to address the problems. Wonica said a uniform short-sale form developed by the California Association of Realtors could serve as an industry model. He plans a similar get-together with mortgage bankers and servicers during a summer conference in Las Vegas.
“We want to set up a communications line between the bankers and the brokers. Let’s meet with these guys and see if we could get a meeting of the minds.”
A top Wells Fargo official agrees.
“We as an industry were not the best in getting back to everyone. Wells Fargo has put in processes to address that,” said David Knight, a senior vice president at Wells Fargo Home Mortgage. We’re … working with NAR and other groups (to) reexamine our own process. There is always room (to improve).”
For the foreseeable future, foreclosure and short sales will remain a prominent feature in the real estate landscape. Short sales will continue to be an option for homeowners who owe more on their mortgage debt that their houses are worth.
Saving money with short sales
Indeed, the economic downturn wiped out about $3.3 trillion in home values last year, according to a report by Zillow.com, a company that offers online real estate information. Since the market peak four years ago, home equity has been eroded by more than $6 trillion.
In 2008, short sales accounted for about 11 percent of U.S. home sales, while foreclosure made up 20 percent of the market.
Most experts agree that short sales have a lesser impact to owners and lenders than bank-owned (REO) deals. That is reinforced in a study by Connecticut-based Clayton Holdings Inc., which follows more than $500 billion in mortgage loans for investors. The study showed lenders from May to October 2008 suffered an average 37 percent loan loss through short sales versus 56 percent on homes sold after foreclosure.
We think (a) short sale is superior to foreclosure,” Knight said. “A short sale is not a bad deal all around.”
But these deals are more complicated and time-consuming than traditional sales. All parties with liens on the house — from the second mortgage holder to the private mortgage insurer to the tax collector — must sign off on the transaction. That’s where many of the problems arise.
“My sellers are so frustrated,” Sherer said. “We need to come up with real solutions.”
Tales from the trenches
There is no shortage of complaints from the field:
- In the Fort Myers area, one homeowner had five separate sales contracts rejected by the bank in the past year. The home value slid from $325,000 to about $200,000 today. That home remains unsold.
- In Phoenix, a bank turned down a buyer’s $225,000 offer for a home. Several weeks later, that listed for $200,000 as a bank-owned property (REO) for sale. “It’s hard to know what a bank will consider,” said Jay Thompson of Thompson’s Realty in Gilbert, Ariz. “Some agents won’t list short sales.”
- On California’s Central Coast, a bank took four months to finally accept an offer. But the deal collapsed because the buyer’s financing was no longer available.
- Over the past six months, short sales averaged 113 days to complete compared with 56 days for traditional deals and 43 days for real estate-owned in San Diego County, Calif., according to an analyst by Realtor John Altman of J.T. Altman and Associates in San Diego.
- In Folsom, Calif., one deal took seven months to go through, putting a strain on the buyer’s marriage. “My buyers hung in there.” But they “almost got a divorce in the process. I was ready to quit real estate,” said Tracey Saizan of Keller Williams Realty in Elk Grove, Calif.
Short sales make up three out of five listings in Elk Grove, a suburban community south of Sacramento. Every other day, Saizan spends up to four hours on the telephone with lenders to keep tabs on the seven short-sale deals she has in the works.
On average, it takes 60 days for a bank to respond to an offer, she said, “It would certainly help (if) there are guidelines for banks to follow.”
Progress, of sorts
Savvy real estate agents are setting realistic expectations for their buyers and sellers, stressing patience is a major virtue to survive the process. They suggest homeowners compile financial statements, hardship letters and other information early so a complete short-sale package can be sent to lenders and lessen the chances of a last-minute glitch.
Fannie Mae and Freddie Mac are trying to speed up the process, too. Fannie Mae, for example, launched pilot programs this winter in Florida and Phoenix that preapproved short sales for dozen of homes. The government-backed lender completed the research on a troubled property in advance and obtained all of the necessary clearances in advance.
In February, Wells Fargo crafted a short-sale fact sheet for borrowers and real estate agents that discusses the process and outlines the lender’s time line for dealing with these transactions. Wells Fargo’s goal is making a short-sale decision in 25 business days.
“A little more than a year ago, all the servicers had gotten a little overwhelmed. There was a lot of volume. It was a pretty unfamiliar area. People were treating them as regular sales,” Knight said. “What we’re trying to do is get everything we can do upfront. There are challenges.”
Those challenges include disagreements over payments between first and second mortgage holders. The second, for example, may be offered a $3,000 payment, but it wants $15,000. If the dispute isn’t settled, the short sale falls through.
“You have to deal with all of these different people. Everybody has to take a loss. Not all of those people want to walk away with nothing,” said Louis Galuppo, an attorney and director of Residential Real Estate at the Burnham-Moores Center for Real Estate at the University of San Diego.
Galuppo said there’s no easy answer. Lawmakers can’t dictate how much lienholders should receive. “It’s not going to happen unless we change the very political system. One solution, he said, is for Uncle Sam to set aside a pool of federal money for lienholders to tap into in order to recoup some of their losses.
There is one positive sign that could signal a change. Last month, Bank America said it plans to ease its stand on short-sale payments. A major holder of second liens in the U.S., BofA is seeking 5 percent of sale proceeds after real estate commissions and other costs. Previously, it asked for 10 percent of what homeowners owed on second mortgages or the balance of a home-equity loan.
Still, Wonica isn’t prepared to wait. “I’m going to be aggressive. If they want to fix a problem, sit down at the table and fix it. We have to attack it.”
