Seeking Closure on Short Sales(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 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.” 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.
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. 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.
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