I think we can all agree that the real estate slogfest is likely to continue.
What would it take to ignite the market in 2011?
All we need to do is to increase sales.
Because if the pace of sales increased dramatically, it would give direction to all involved. More comps would assist sellers in getting their price right, and buyers would have more certainty, and comfort, about the trend in their area, and make decisions accordingly.
Is it possible? Yes, I think it is – and these are the things to look for that could cause more sales:
1. Servicers get more proficient at processing short sales.
Bank of America and Chase, two of the biggest servicers, seem to be getting better. Our experience of BofA is that they are getting the appraisals/BPOs/valuations done in 30 days, though after that they are still dragging. Other realtors have had Chase closing short sales in 60-90 days, and on the Chase website they say that they’ll have an answer within 30 days after receiving the full package.
If buyers and agents knew that they could close short sales in 60 days, instead of going to a black hole, they’d be more likely to pursue them.
2. Servicers pre-approve the prices they would accept on short sales.
In April they said that they were going to start pre-approving the prices, but I haven’t seen or heard of any. If they smarten up and put a price on them first, and then authorize the listing, it would feel like a regular sale. We’d even settle for a price range if it were combined with a 60-day process. It would also help to eliminate the fraud and deceit being committed by realtors. Sure, some of the prices would be too high, but that could happen to any listing. Of today’s 12,194 active listings in San Diego County, 2,820 of them, or 23% are marked as short sales.
3. Servicers should publish the trustee-sale opening bids a week in advance.
They could really move some product if the trustee-sale process was made easier for all to pursue. It seems like basic common sense that if they wanted to quit taking back so many properties, they should streamline that one simple ingredient. They have postponed virtually all trustee sales at least once or twice – heck, put the price on them and postpone for an extra week so owner-occupiers can round up the money and make plans to attend.
4. Lenders and servicers should publicize their intentions clearly.
Nobody knows what to expect next, and maybe it’s asking a lot for banks/servicers to be that organized. But if the CEOs would step in front of a microphone every week or month for updates on their workload, it would at least bring more certainty. Look at how BP handled the oil spill – they publicized their intentions so much we got tired of hearing them, and it went away. The banks should do the same.
5. NAR, CAR, and the big real estate franchisors should tell sellers to lower their price.
It’s the 900-pound boa constrictor in every office that is strangling sales, profits, and agents’ careers. The re-education of realtors on how to operate in this environment is close to zero – there is none, until you are just run out of the business.
We had a case this month where our buyer got within 97% of list price, but the listing agent said that wasn’t good enough. He and the seller countered that we had to pay for termite and septic work too – but hadn’t bothered to complete reports on either, so the dollar amounts were unknown. The listing agent has been in the business longer than me, and still hasn’t re-calibrated – he thinks he can demand whatever he wants from buyers. This type of stuff happens every day.
Instead, our buyer bought a different house a mile away for 90% of list price.
6. The government and servicers should set a deadline for loan-mod requests.
If all loan-modification packages had to be received by June 1, 2011, and those that qualify have to close by the end of the year, at least buyers would know that this loan-mod charade would have an ending. Many will re-default anyway, give them their one chance and then let’s stop insulting the good-paying folks of this country.
7. Process a borrower’s loan mod and foreclosure together.
The robo-signing settlement is suggesting that all loan mod attempts have to be exhausted before the foreclosure proceedings can begin, but that is hogwash. Don’t give deadbeats and servicers another opportunity to exploit the system, and delay the inevitable. Run them both at the same time and light a fire under everyone involved.
Have any other ideas? Leave them in the comment section, and I’ll send them to the powers-that-be.
2, 3, 5 and 6 would be great steps. As for 6, I’d just add that any mod request that was made before October 1, 2010 must be granted or denied before year end 2010. And the government sponsored benefit should be to pay defaulters or denied loan modders a cash stipend to turn the keys over to the foreclosing lender, move out and rent. Right now EVERY incentive for the deadbeat is to stay until the eviction notice arrives, and EVERY incentive for the servicer is to delay the trustee sale, and the predominant incentive for non-pooled loans is to delay recognizing the loss. There are no incentives for pooled loans because there is no one actually making decisions on behalf of the pools, so they end up being the bitch of the servicer.
Glad you added 7. Right on. The goal should be a mod decision within 120 days of default, and trustee sale within 270 days of default. Run em concurrently.
Thanks Sean.
For some perspective on SD foreclosures, 2010.
Year-to-Date:
REOs: 8,555
3rd-party buys: 3,319
Cancellations: 13,550
Current counts:
NODs: 7,029
NOTs: 7,956
If they came out and said that everyone on the list had to be resolved by X date, it would help. With it so open-ended, there is no urgency.
It seems like having a preapproved price from servicers only increases the incentive for fraud. Say the servicer approves a price of $90k for a short sale on a house that is worth $100k. What’s to stop a seller from taking an offer at $90k from a buyer willing to pay $10k for the refrigerator?
Also from what I’ve seen there are many short sales where the seller has no interest in selling the house and are not even allowing people to see it!
The right solution is for the servicer to assign their own agent and see all the offers themselves. I think this combined with cash for keys would clear the market.
How about we call it the “approved list price”, and the agent has to prove it was on the MLS/open market for seven days to allow every buyer a chance?
If they really wanted to get it smoking, the buyers’ agents would have the ability to upload their offer direct to the lender.
JTR – re-wrote part 7 for you….
7. Process a borrower’s original LOAN and foreclosure together.
The robo-signing settlement is suggesting that all LOANS will be foreclosures. GIVE deadbeats and servicers another opportunity to exploit the system, and delay the inevitable. Run them both at the same time and light a fire under everyone involved.
Sounds good. Also there should be a phone number to call if the short seller isn’t allowing people to see the house.
Who’s paying for all this?
Seems there’s a ‘town hall’ meeting (12/1, Hotel Del ) for homeowners and buyers being conducted by the RE ‘gurus’ and politicians. Personally, I doubt any substantive information will be shared. But maybe it’s just me and my cynical and skeptical attitude on these sorts of things.
http://www.prnewswire.com/news-releases/free-live-real-estate-town-hall-meeting-121-attracts-market-experts-to-discuss-real-estate-crisissolutions-108754294.html
All this talk of short sales make me nauseous. The banks need to drop the hammer and foreclose. The elective sellers who are not willing to sell at current market value need to cancel. This will reduce the inventory to the point where maybe the banks could push the extra inventory through by creating a little urgency for the buyers.
Looking back on it the stock market correction was brutal last spring but it worked. The weak hands were shook out with such speed and precision it left me in awe.
I posted this earlier, but auctions make a lot of sense for short sales. Post the banks’ price (consideration for the 2nd, and other costs should be included) as the minimum bid, and then have at it. Think of it as a ‘cooperative’ foreclosure.
I agree with Pemeliza. Short sales by their very nature are ripe for abuse and uncertainty.
I, who was opposed to massive foreclosures at the outset of this depression, now think it is time to begin foreclosing. I think this thinking is happening at the very top.
The banks, whether you like it or not, will control supply and know it is in their best interest to not flood the market.
Telling people to drop their prices is not realistic either. The market will tell them that, not propaganda to help a select few trying to also manipulate a price decrease. Like p-zila said this will get rid of elective sellers and allow the banks to add supply.
So what is the actual purpose of a short sale? Why even have them? To me, they just cause a lot of trouble, a lot of fraud and I just don’t get the point. Then the bank doesn’t put a price on the property….so you have to guess.
JTR, Why even allow short sales at all? Do you handle them?
Lower prices would also increase sales.
“14.Lower prices would also increase sales.”
Not if buyers thought they could buy even lower in the future.
8.Who’s paying for all this?
I am.
Annabama is going to send these ideas to every member of Congress, the White House, and to the CEO of every major lender.
No charge to you.
JTR, Why even allow short sales at all? Do you handle them?
I try to limit my involvement, but there are so many you run across them daily.
The only short sales of interest are those who are close to their foreclosure date, and have dropped their price to market or less, so at least you might get a good deal, in exchange for the hassle and waiting.
I’m in favor of eliminating them, it would change the landscape tremendously. We’d be down to two choices; make your payments or get foreclosed. Whoever can convince the powers-that-be would be a national hero, because the real estate market would be fixed within a year.
From DO at cnbc:
Fannie Mae, while not a big bank, is one of the largest holders of REO.
Just this week it announced a pilot program, “to collect and manage real estate purchase offers for Fannie Mae-owned properties in Orlando, FL, San Diego, CA, and in Wayne County, Detroit, MI.
Through the pilot, real estate agents submit offers on behalf of their clients online, receive confirmations and track the status of submitted offers.”
It’s all part of streamlining the process and getting homes sold more quickly and efficiently. Meanwhile the big banks are employing armies of REO sales agents to push their products.
In theory, short sales are a good deal for all involved. The guy losing the house gets his house takes a smaller hit to their credit than a foreclosure (although not that much smaller), the bank should make more money (net) because they never have to spend the money to foreclose on the place, kick out the former owner, fix it up, pay a gardener/electric bill/HOA fee/property taxes/etc. while the sale is in progress, and then deal with selling it, and the buyer gets a good deal.
In practice, there tends to be seventeen different loans on the property, a buyer just milking the free rent program a little longer, and a bank who never returns phone calls and loses paperwork.
These ideas are great. Maybe you should create an online petition to put more backing behind the ideas when you send them.