Going Long on Short Sales- Money in Your Pocket?

May 27, 2009 · Leave a Comment

Filed Under Foreclosure, Real Estate Info

Over the last year many home buyers have been panning for GOLD with SHORT SALE offers. The typical short sale scenario is that the seller is upside down on the mortgage(s) and the buyer is hoping to capitalize on market conditions. However, most buyers have been very frustrated and disappointed with the results. Even if the seller agrees to take the buyer’s offer price, the lack of ANY response from the lenders, time delays, and the volumes of paperwork involved have made the experience less than satisfying or rewarding.

There is an old saying that “too many cooks ruin the stew” and such is often the case with short sales. The problem is there are too many people involved with self-serving interests and trying to hold the deal together can be challenging. Short sales are a moving target and the buyers and sellers can be left hanging out to dry with nothing to show for their efforts but frustration and wasted time, not to mention money spent on appraisals, inspections, and other reports. Statistics show that only about 30 -35% of short sale offers are accepted and only about 10% to 15% of short sale offers actually come to fruition. With changing market conditions and the time delays, buyers may be better off purchasing property on the open market. In years past, many lenders have been receptive to short sales. But my experience last year (2008) was that most lenders were so buried with short sale requests (mostly in other counties) that they did not even respond to short sale offers in San Francisco. The lenders chose to take distress property into inventory through the foreclosure process, vacate the premises (absent the homeowner or tenant), then list and sell the property to the highest bidder on the open market.

However, all this being said, the process has now been streamlined to make short sale offers easier to accomplish. Some of the big players, Bank of America and Wells Fargo have announced new cooperative programs to help expedite the SHORT SALE process. BofA has increased staffing, updated training and created a dedicated short sale call center at (866) 880-1232. Of course, MONEY is always an incentive. On May 14, the Treasury Department announced a PLAN to “provide incentives for servicers and borrowers to pursue short sales.” Treasury will pay a servicer $1,000 for completing a successful short sale, it will pay the borrower $1,500 to assist with relocation expenses, and it will pay second-lien holders who release their claims up to $1,000. Lenders are now giving the short sale process a second look as a less costly means to rid excess inventory and many sellers are finding a quicker and potentially less self-destructive way to get out from under over-encumbered property.

On February 18, the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the U.S. housing market. As promised, two weeks later on March 4, the Administration published detailed program guidelines.

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