There was a time in the not to distant past that obtaining a short sale meant long waits and frustration locating a bank representative to talk to. Additionally, the short sale process was way too long. Three, six or eight months to obtain a short sale was not unheard of.
There were many reasons for the short sale processing delay. The most important reasons were as follows: 1) the banks were overwhelmed; since the foreclosure crisis began millions of homes across the nation have fallen behind on there payments. The banks, whose primary roll was making loans now had did not have the man power in place to handle the flood of foreclosures that would came their way. 2) The banks did not want to approve short sales. Well, why not? Simple: the bank would lose money. When the banks provide a short sale it has to reduce the amount they expected to receive. The banks, and especially the big banks, have share holders, boards and investors that they have to answer to. Short sales are a way for the banks to quickly loose money and the bank is not in the business of doing that. 3) The short sale process is way too paper intensive. Some of the documents needed to approve the short sale are bank statements, most recent pay stubs, financial worksheets, hard ship letter, etc. Some banks even have there own “Short Sale package” that you have to down load or they will mail one to you. Many of these packets are sixteen, eighteen or twenty or more pages long. All of the above contributed to the short sale processing delay.
Now there are other things that effect the short sale process like the market conditions and buyer qualifications, however, the list above highlights the bank’s way of slowing down the short sale process and leading to a sheriff sale.
However, by the late spring and summer of 2011 the short sale process got a new attitude. Now banks are aggressively marketing short sales as a way to assist home owners out of foreclosure. Banks have been even announcing short sale initiatives providing the homeowner with financial assistance to list their home and sell rather than wait for foreclosure. We have even located many “short sale negotiator” jobs throughout the Internet in the last few months seeking processors to work on the foreclosure files. Some of these Short sale negotiators, now having been hired are even calling back!
The amount of the documents that are required to process a short sale may not have decreased but at least the banks have hired enough processors to handle the new influx of short sale requests.
Why now are the banks so eager to process and grant short sale when only few months ago they delayed and often refused to seriously consider short sales? A number of things have affected the foreclosure side of the banks recently: 1) Robo signing. Remember the robo signing controversy. Well that scandal has had a large impact on the way back process and deal with foreclosures. With pressure from the many State’s Attorney Generals around the country, the banks are faced with a new reality: get your act together or the entire house could fall. 2) The bottom line for the banks is money. The banks don’t make money when a house is sold on the steps of a court house. Especially, not in a market where housing prices are down, way down. In fact, the foreclosure process from start to finish most times cost the banks more than if they just agreed to a short sale. Maintaining and up keeping the property has a cost. But the real lost in dollars come to the banks when after the house is sold at the court house it is goes on the REO list (Real Property Owned). Houses sold as a REO can easily sale at ⅓ or lower of the price that it once sold for. For example, it is not hard to find a house that previously had a mortgage of $300,000, now selling a an REO for $80,000.00. The bank has to take a $220,000 lost!
However, when a bank agrees to a short sale they usually require a BPO (Broker Price Opinion) which is suppose to give the bank some idea what someone would pay for the house on the open market. BPO’s tend to come in lower than the previous loan amount, because the real estate market is down nation wide. However, BPO’s, and therefore short sale prices, agreed to by the bank are usually not as low as the price the house would be if it were an REO. So in the example above, the BPO could easily come in at $150,000 (depending on the market) and cut bank’s losses.
The end result: there will be a lot of short sale houses on the market in the next to two years which will will continue to push home prices down in many communities. However, for the banks, its not a total win but it’s not a total loss either.
By William Simms
info@ehomeassistance.com
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