Realtors Outline Short Sale Concerns
SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS
July 20th, 2009
Short sales, defined as selling a property for less than what it would take to pay off loans and closing costs, are a significant part of real estate activity in Shasta County. Anyone involved with a short sale- buyers, sellers, escrow and title companies and real estate agents, have learned this is a difficult process that leads to failure more often than success. Realtors across the country have weighed in on the topic with these concerns:
- A lack of conformity among lenders/loan servicers with regards to information demands and processes
- Lost documents requiring multiple resubmissions
- Unrealistic view of current home values, delaying approval, often until the buyer walks away from the deal
- Lenders ultimately end up losing more money because they foreclose instead of agreeing to a short payoff
- The process for approval takes too long-most buyers withdraw offers and buy something else
- Non-responsivenesson the part of loan servicer/lender-even as to the status of an offer
- Insufficient or inexperienced staffrepresent lender/loan servicer
One local mortgage broker believes lenders are intentionally making the process difficult because the lender benefits in the long run by opting for foreclosure. The bank may write off the loss, sell the foreclosed asset to another investor or bank and finally look to the federal government for funds to make up any losses after all the dust settles.
I would add that lenders and the loan servicing companies they hire to manage these real estate assets have difficulty communicating within their company. It is not uncommon for the loss mitigation department to approve a short sale only to have their foreclosure department auction the property during the time period allowed to close the sale on the agreed upon price and terms. In other words, the left hand does not know what the right hand is doing.
In some cases, a buyer moves ahead with the transaction in good faith, knowing the escrow company has a written demand from the lender, ordering inspections, an appraisal and arranging for repairs only to find out the bank let the property go to auction. The buyer and their lender, the title company, escrow company, real estate agents and seller all lose when this happens. And it is happening, over and over again.
Ironically, many lenders take as long as 2-3 months to approve a short sale, then want it closed in 30 days or less. Recent rule changes have lengthened the traditional loan processing time needed from 30 days or less to 45 days or more. When lenders are disposing of REO’s they want it done yesterday. When they are processing a loan for a customer they want at least 45 days to process and fund. Why do banks talk out of both sides of their mouth?
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
