The Sacramento Bee recently published an article discussing – among other things – how Realtors prep both sellers and potential buyers for short sales.
Many people don’t realize this, but setting proper expectations regarding what to expect throughout the short sale process, can save or kill a deal just as much as the actual offer itself.
The network of Realtors that we work with are an amazing group agents, who very bluntly and realistically advise on the length of the process, as well as the various responses we could receive from the lender.
When people ask what our success rate is at Short Sale Legal Services, I usually advise them it’s 85% - when the buyer hangs in. When we work with new agents who have not set the proper (or any) expectations, those are the deals we tend lose - more than lender rejections, more than first/second lien bickering.
As stated in the article, it’s not uncommon for us to come across loss mitigation agents who are sitting with 250-300 files on their desk at any given time as well. While my sympathy for them is somewhat limited, it is the reality of the situation.
Once a loss mit rep finally audits a file and decides whether or not it meets investor guidelines – since many of the lenders we deal with only service the loan – they often have to get in line with every other servicer and wait on investor approval.
Generally speaking, a home with one lien and a “larger” lender servicing the loan will mean an average of about 60 days from submission to approval. Add more liens/lenders and that time frame increases. Add a lender or servicer who’s never done a short sale and the time frame could double or triple. Of course, we’ve seen short sales approved in less than two weeks, but that’s rare.
In addition to setting the proper expectations, it also helps to involve someone (attorney or Realtor) who’s very familiar with the current short sale process. Anyone who advises they’ve been doing short sales for “30 years” is being somewhat misleading, since the process in which short sales are approved or rejected is very different now, due not only to the sheer volume, but also for the multitude of different reasons that are now causing people to do short sales. You’re best bet is dealing with someone whose experience is largely based in the past several years, not decades.
So while you’d be hard-pressed to find many people who can refer to their short sale process as a “dream,” you can take steps to accomplish a successful outcome without it turning into a nightmare…
Friday, September 24, 2010
Friday, September 10, 2010
Foreclosure Roulette
In a blog from The Huffington Post, Arthur Delany dissects the game of foreclosure roulette that hundreds of thousand of Americans are involuntarily playing with their lenders right now.
Once you’ve stopped paying your mortgage – and depending on the laws of the state in which the home is located – you’ve traditionally had between 4 and 10 months before the local sheriff is knocking at your door.
Not anymore.
As noted on radaronline.com, the average foreclosure now takes almost 16 months – meaning people are living mortgage/rent free for almost a year and a half. For many however, they’d prefer for that not to be the case.
From my experience, the overwhelming majority would like the security of coming home every day, without wondering if this will be the evening they pull into their driveway and find their belongings at the curb. For most, stability trumps rent-free living.
If the idea put forth in the article – that lenders are randomly foreclosing to prevent “widespread moral hazard” while leaving the rest so that losses aren’t recognized – is true, lenders are in for a rude awakening.
Few believe the housing crisis is behind us, so to assume that keeping homes that would have otherwise been foreclosed on the books in order to see them return to anywhere near their peak bubble prices, is a fantasy. Many markets are expecting prices to continue dropping over the next two years, while for most markets it could be decades before prices return to what they once were.
Working with people – whether it be long-term loan modifications, rent-to-own or sensible principle reductions, is the only way we’re going to get through this mess.
At a point, lenders are going to have to concede the true values of most homes are far below their peak-appraised value. Instead of playing this waiting game that is doomed to fail, work with people efficiently and help to keep them in their homes. Homeowners have some stability, neighborhoods will be full with maintainable property values and lenders will make far more than what they would otherwise receive, for a vacant listing competing with thousands of other vacant listings.
It’s better for the customer, it’s better for the community and in turn, it will be better for the lender.
And of course, when all else fails, have a streamlined short sale process in place!
Once you’ve stopped paying your mortgage – and depending on the laws of the state in which the home is located – you’ve traditionally had between 4 and 10 months before the local sheriff is knocking at your door.
Not anymore.
As noted on radaronline.com, the average foreclosure now takes almost 16 months – meaning people are living mortgage/rent free for almost a year and a half. For many however, they’d prefer for that not to be the case.
From my experience, the overwhelming majority would like the security of coming home every day, without wondering if this will be the evening they pull into their driveway and find their belongings at the curb. For most, stability trumps rent-free living.
If the idea put forth in the article – that lenders are randomly foreclosing to prevent “widespread moral hazard” while leaving the rest so that losses aren’t recognized – is true, lenders are in for a rude awakening.
Few believe the housing crisis is behind us, so to assume that keeping homes that would have otherwise been foreclosed on the books in order to see them return to anywhere near their peak bubble prices, is a fantasy. Many markets are expecting prices to continue dropping over the next two years, while for most markets it could be decades before prices return to what they once were.
Working with people – whether it be long-term loan modifications, rent-to-own or sensible principle reductions, is the only way we’re going to get through this mess.
At a point, lenders are going to have to concede the true values of most homes are far below their peak-appraised value. Instead of playing this waiting game that is doomed to fail, work with people efficiently and help to keep them in their homes. Homeowners have some stability, neighborhoods will be full with maintainable property values and lenders will make far more than what they would otherwise receive, for a vacant listing competing with thousands of other vacant listings.
It’s better for the customer, it’s better for the community and in turn, it will be better for the lender.
And of course, when all else fails, have a streamlined short sale process in place!
Friday, September 3, 2010
Investing in Short Sales
Les Christie for CNNMoney.com discusses how investors (“vultures”) are swooping in and buying up short sales for long-term rental investment, instead of buying and flipping them as had been popular. While he cites markets like Las Vegas, Phoenix and Miami – communities who’s climate will keep them popular destinations for both seasonal visitors and full time residents – investors are helping combat the growing inventory all over the country, by lining up for deals.
Now, I can’t say I agree that lenders have “gotten faster at processing short sales” as he states in the article, but I can say they certainly profit on them far more than they would on a foreclosure. Between the money they save on legal fees, to the costs of carrying the property until they’re able to re-list (in some states, for months to even years), there is no doubt a short sale saves the lender money.
For the investors, the need for rental units will be high for some time. It’s expected that home values will continue to drop through 2013 and it could be decades before property values come back to their bubble peaks. Factor in high unemployment, strategic defaults, etc., and that leaves a lot of people in need of a home, but with credit that might not merit a decent mortgage for the foreseeable future. Many people we work with, say they’ll never own again and plan on becoming renters for life.
Generally speaking, it’s a win for all sides – the lender, the investor, the homeowner and the renter. Still, we come across plenty of lenders and servicers who have yet to grasp the realities of the new real estate world order. Here’s hoping they come around before the investors lose interest…
Now, I can’t say I agree that lenders have “gotten faster at processing short sales” as he states in the article, but I can say they certainly profit on them far more than they would on a foreclosure. Between the money they save on legal fees, to the costs of carrying the property until they’re able to re-list (in some states, for months to even years), there is no doubt a short sale saves the lender money.
For the investors, the need for rental units will be high for some time. It’s expected that home values will continue to drop through 2013 and it could be decades before property values come back to their bubble peaks. Factor in high unemployment, strategic defaults, etc., and that leaves a lot of people in need of a home, but with credit that might not merit a decent mortgage for the foreseeable future. Many people we work with, say they’ll never own again and plan on becoming renters for life.
Generally speaking, it’s a win for all sides – the lender, the investor, the homeowner and the renter. Still, we come across plenty of lenders and servicers who have yet to grasp the realities of the new real estate world order. Here’s hoping they come around before the investors lose interest…
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