We have wondered if 2012 will be the Year of the Short Sale.
Reader TH asked, “What is the problem with short sales?”
The gripe about short sales is that they take so long to complete. Over the last few years, it would be 6-12 months before you’d hear anything, let alone close – and buyers wouldn’t wait.
But now with HAFA throwing a little money at the sellers ($3,000), and relaxing the qualifying guidelines, the process has been streamlined.
A review of 23 short sales closed since November 1, 2011 around NSDCC revealed the following:
1. The average time to approve these short sales was 66 days.
2. Removing three that took 100+ days, and the average was 55 days for short-sale approval.
At first we thought that HAFA’s rule requiring that the lenders waive their right to collect any deficiency, combined with California’s SB 458, could cause the lenders to slow down or stop short sales altogether. But instead, it appears that the system has improved greatly.
There were 59 sales marked as short sales, but due to the lousy reporting by listing agents, I only considered the 23 that marked their listing from ACT to CONT, and then from CONT to PEND and measured the difference in time.
The MLS remarks allow for the listing agent to report any concessions. Only two of the 59 mentioned any money brought in to make the deal, another sticking point from past short sales.
If the lenders are willing to process these promptly (less than two months), and not demand money be brought in, we should see smoother sailing with short-sale approvals this year.
It looks like 2012 could be the Year of the Short Sale!
It looks like 2012 could be the Year of the Short Sale!
Yeah, let’s just hope it isn’t the Year of the Fraudulent Short Sale.
Jim – shouldn’t the time be measured until the property actually closed – if it ever did? I’ve seen properties listed as “pending” for months.
Our short sale purchase took four months and a lot of frustration. The HUD1 was approved with only two hours left on the clock. The wife was hysterical. Screaming at me to get the deal done. And the seller got 30K on the closing even though the first and the second lost hundreds of thousands of dollars on the short sale. Only in America!
30 days so far with no answer. Guess I shouldn’t worry until 60 days.
“The wife was hysterical. Screaming at me to get the deal done”
This is exactly why any spouse with the laboring oar to get a transaction done needs someone like JTR as your agent. Call it cheap marriage insurance.
Jim, 60 days is about average for short sales in Sonoma county. I think the record in my office still stands at 721 days. The price came down a lot in that period…
My lease isn’t up until the Spring time so I kind of want the bank to take their time.
Go figure…
I am in escrow on my second attempted short sale. I cancelled from the first because I got angry with the listing agent and the bank and lost focus to close the deal (in retrospect it was all pretty minor). In both cases, the wait time to hear from the banks was a bit over two months, and both were from a Wells + Chase combo of lenders.
Here in my part of the Bay Area, short sales and foreclosures are mostly what is left. And even distressed inventory that sat for a very long time has sold or gone pending. There is no inventory to speak of. That vacuum may encourage agents and banks to put more energy into processing short sales.
re: Just some guy. I am very analytical and the long process of the short sale lets me take a good look at the property, fully research the permit history, evaluate schools and neighborhoods (actually walk them, talk with neighbors, ask them about life there(, try out the commute, etc. The length is not bad, it’s the uncertainty which is off-putting.
@salsahead
Thanks for the advice and I agree with you about taking advantage of the short sale to evaluate the purchase.
We are in a good position because we have already scouted this area. Therefore, we jumped all over the listing because it was priced right and it met all of our criteria.
Now…it is hurry up and wait. If the deal falls apart, then oh we’ll….nothing changes and we simply wait for the next listing.
I agree. Short sales will have to increase in 2012 and banks have to simplyfy the process due to the following reasons
1. As stated in previous posts negative and near negative equity in SD is at 33%. It is a huge problem because it contrains the ability to remedy financial difficulties(divorce,job loss, health etc). A Jan 2012 Fed Reserve white paper stated …..”The numbers are improving but moving sideways. Simply put the numbers are improving because foreclosures are taking properties off the market.” There is a point with negative equity when a short sale or strategic default turns from being immoral to smart. be an outlier and be smart.
2. Banks currently own over 800,000 REO’s (foreclosures) that they have not yet put on the market, and are simply sitting on. Bank holding costs are increasing as they let them sit vacant, accumulating fines, property taxes, back HOA dues etc.
There are 6,500,000 mortgages currently in default in the United States.
The default numbers as a percentage of homes are rising again(corelogic) and the cure rate is low.
-30 days late: 29% Cure Rate (in other words, 71% will go to foreclosure or short sale)
-60 days late: 5% Cure Rate
-90 days late: 0% Cure Rate
While these are national numbers, these default properties are heavily concentrated in the hardest hit states of Florida, Nevada, Arizona and California.
There is no doubt that with a simplified and expedited short sale process we will see more in 2012. Have patience and bid low.
As a palm springs native we are seeing short sales speeds increase in our area.
We do see the short sale tide changing from “I’m embarrassed and not a low life” to “its ok because it a good decision”. I read a paper from a NAR link that had the reasons for a short sale. I will copy below .
One is, obviously, negative equity, and it’s not just being underwater, but being deeply underwater. And most of the data suggest it’s somewhere around 125 to 130 percent—so being more than 30 percent below your mortgage amount—that people start to really consider whether or not it’s worth continuing to make that mortgage payment so they start a short sale
Whether or not it’s an owner-occupied or an investor home. Obviously, if you live in the house, and it’s your own home, the decision is much harder than if it is an investment property of yours.
And, then, finally, one of the most interesting ones, are that there seem to be very strong spillover effects in that people who know others who have done a short sale are much more likely to short sale themselves.
Hope this helps
I am sorry
It is repulsive that people can’t just pay what they owe and not beg the bank for leniency. Back when I had problems I got a second job and my wife did as well and spent less. This “short sell “is a “short cut” to do the right thing.
OMG. What do you owe to the banks? If you or anyone isunderwater, park your pride and walk and save your money. The next wave is AITD and assume a loan with your bad credit. This is what I did in 1993.
You owe your allegiance to your family and yourself , there is a point when you have to cut your losses. I personally have worked in the mortgage business for twenty five years and will tell you bankers have no qualms of throwing you and your family out on the street, nothing personal mind you, only following prudent financial measures. I see it every day in San Diego where people will not leave their homes knowing it will take 10 more years to recover.
The same behavior of financial self interest and providing shelter from the storm for your family and yourself is your number one goal. They want to hang some morality guilt trip after stealing and gauging the American people this moral argument is a ruse for the stupid to stay and line the pockets of the BankSteers – Run don’t Walk Run move your money into a “safe place” and move on. The greatest greed is that of the one percent and the most Greedy Bs on planet earth you have one life enjoy your life don’t suffer in poverty for people that would have you starve and die for lack of simple health provisions, yes they won’t and don’t give a damn for you and yours to even offer a national health plan and they talk of honor and morality?
This is beyond laughable beyond the absurd to sit in place as i watch many individuals financial worth dwindle away because they are contributing to a greedy culture. Paying because it is moral is the argument of a fool meant for children a joke coming from the greedy bastards and their myopic zombies that argue your self-interest is line with the financial industry what a farce . I tell all my clients that can not refinance to RUN DON’T WALK RUN from a money pit that only benefits the lien holder and drains you of your only means to survive – what a pitiful argument from the financial sector and their apologists – a moral argument with no basis in morality only thier self-interest over yours.
Since when am I obligated to crooks (financial sector/Wall Street) the biggest crooks in the world to stay stuck in an upside down home? I can barely make payments on when I can buy the same home for half or less than what I owe and provide a shelter and a decent standard of living for my family for their future years such as college tuition and so much more. Only a fool would impoverish himself relegate his children to poverty living month to month fearing one mishap and the bank throws you and your family out on the street or instead secure your futures and live with your guilt and remorse equal to that of Goldman and all the others.
They won’t lose but a few dollars after the loan insurance pays them and the interest payments are calculated the banks have not “lost” money in the traditional sense (they keep what payments you have made plus your down payment is lost to them) in turn you and your family enjoy a decent standard of life. I can live with my guilt if those receiving $1.5 Billion in bonus money can sleep well after we bailed them out then I can sleep just as well – what goes around comes around.
Always take care of yourself and your family first and worry about these moral windbags some other day. If you are underwater shortsale or walk. You have no obligationother than giving them he heome. Look out for yourself no one else will….no one but you will provide for your needs so do the financial smart thing and let the moralists and apologists for Wall street spew their dribble and if you make a business deal with a religulous person get it in writing they are the worst and their word is not worth a shyte not with God telling them how to screw you over – they are the worst. Look out for yourself no one else will get that idea in your head these moralists are talking from some orifice I can’t which take a guess. Look out for yourself and your family first then Wall Street do the honorable thing take care of your family.
Have a good day
Short sales help the banks
The biggest plus for banks is that they stand to make more from a short sale than a foreclosure. According to foreclosure specialists RealtyTrac.com, the average price of a foreclosed home in the second quarter of 2011 was $164,217, while the average price of a short sale was $192,129.
http://bottomline.msnbc.msn.com/_news/2011/12/29/9779389-increase-in-short-sales-give-market-a-little-breathing-room
There is no right or wrong in deciding to short sell. Two people in identical positions can make different choices about whether to short sale or stick it out, and neither should criticize the other for their decision. Its not always an easy decision to make.
Sticking it to the bank is not an absolute requirement because of past wrongdoing, and walking away and moving on is not morally repulsive or a legal crime just because someone else views or handled a similar situation differently.
People on both sides of the issue should lighten up a bit.
Let me take a more neutral position
If one is making decisions from a rational perspective there is a right way to do it. If you are one of the 66% of Americans over 50 having less than $25,000 in the bank it is a simple decision.
Consider Walking from your home or short selling if you are underwater by more than 10% and set aside money for your retirement. Owner occupied Homes are a terrible investment but a great emotional fix. Statistically you will not have a good rerun just a forced savings account at a very low return on investment. Research it.
If you continue to keep paying your mortgage , taxes, maintenance, HOA fees , mello Roos etc you will be renting for the next 10 years. In essence be over paying rent on your home as you wait for it to get to purchase price in the next 10 years and then maybe get a return on investent back in the next 10 years.
If you are draining your 401k to pay the mortgage , walk now
If you are draining your savings account to pay the mortgage , walk now
If you are do not have a college fund for your child because you are paying the mortgage , walk now
Good comments. It took me a while to be able to view the decision of owners to walk away from contracts without any moral bias on my part. Fraud and greed is mixed in with earnestness and responsibility for home owners, real estate agents, mortgage brokers, and lenders. From my very limited perspective, I cannot judge each component, but I do know of cases with integrity in each area (including banks which held their own paper).
I have not encountered fraud in any of my attempted short sales, but I can see that the setting is ripe for fraud, and JTR has documented such.
As a buyer, I was surprised about the amount of personal information conveyed to me, indirectly by the listing agent to my agent, about the personal situation of the seller in the short sale. The bad news is that this is really a rather serious violation of privacy, IMO, one that one would not be tolerated, e.g., in the health or legal professions. The code of conduct which was posted just a little while ago seems to be routinely ignored. The good news is that I get to see that the sellers are in legitimate distress (health, employment, location issues) and I can clearly see that I am not being a tool or enabling fraud.
Hello, End of March beging og April I have been tring to buy a short sale home. It has been very fusterating. I have done what I needed to do and I do believe my Realator is doing everything she can do.A month ago my agent received a memo saying they the bank wanted 63,000$ after clear after deal was done. I did offer 10,000 more than what the bank wanted so I thought the deal would get done quicker. It has been a month since that e-mail was been sent and have not heard anything since.. This process is very fusterating. It is called a short sale. It should be called long sale….I guess I don’t know how long it will take but if i come a cross another good deal on a home i might have to back out of my short sale deal..I t comes down to the bank should at least call and inform the agent what is going on instead of leaving the buyer hanging on to a thin thread…
Hello, End of March beging of April I have been trying to buy a short sale home. It has been a very fusterating journey. I have done what I needed to do and I do believe my Realator is doing everything she can do.A month ago my agent received a memo saying they the bank wanted 63,000$ clear after deal was done. I did offer 10,000$ more than what the bank wanted so I thought the deal would get done quicker. It has been a month since that e-mail was been sent and have not heard anything since.. This process is very fusterating. It is called a short sale. It should be called long sale….I guess I don’t know how long it will take but if I come a cross another good deal on a home I might have to back out of my short sale deal..It comes down to the bank should at least call and inform the agent what is going on instead of leaving the buyer hanging on to a thin thread…