During the past few weeks the sales activity and offers on short sale listings has significantly increased. Every day this week I've received calls inquiring on the availability of our office's short sale listings and have seen multiple offers on almost every listing. It appears that buyers and their agents feel that they can get better deals or get properties in better condition as the inventory of well priced, good condition bank owned properties gets multiple offers and go pending often within days of listing and often at prices higher than the listing price.
While I, my buyers and other agents are challenged making multiple offers in a down market for bank owned properties, I strongly suggest that potential buyers and their agents qualify their short sales.
Many lenders are recognizing the need to improve their response times and processes for negotiating short but fall short from meeting those needs as indicated in the paragraphs below:
CountryWide Trying But Not Succeeding
Just this week, I had a negotiator from CountryWide call me on a file that I had been working for over 6 months to tell me that she couldn't talk to me about the offer I had in since February, because she didn't have an authorization on file. The buyer cancelled their offer and foreclosure is scheduled for May. For the past 3 months, I had spoken to this negotiator, Countrywide's customer service personnel and 2 other negotiators on this file at least twice weekly and had a Letter of Authorization of file since July 2007. In fact, the prior negotiator has told me that she had everything she needed to submit our great offer to management for approval. This negotiator was the 6th negotiator assigned to this file and third since making the offer. On both calls, she told me that she was just hired and was still learning the system. Countrywide has been restructuring its operations and hiring new personnel in order to handle short sales more efficiently, Unfortunately, buyers and sellers with existing offers are either lost in the system or have to wait months to get an answer.
Ocwen, Bank of America and Credit Unions Won't Play
As mentioned in an earlier blog, Ocwen has chosen not do any short sales. After cancelling a short sale contract with a distressed seller, I'm not hearing that Ocwen is reconsidering its position. Bank of America will not negotiate short sales on any properties in which is in in a second position. Many credit unions are also electing not to participate in short sales stating that they mat or will seek judgements on their clients aloowing them to attach future wages or keep their distressed clients from purchasing homes in the future.
Wells Fargo, Washington Mutual & Citibank Are So Slow That Most Buyers Will Walk
Wells Fargo is not adding staff to its loss mitigation department and appears to be willing to accept some foreclosoures. WAMU is extremely slow to respond and has some policies regarding seller's assistance and buyer credits that will limit many low income or low equity buyers (FHA and VA) from completing transaaction.
The Negotiator is Not The Decision Maker
After waiting 30-60 days to have a negotiator assigned, the exciting call call comes from the lender's loss mitigation negotiator, Yoo Hoo!. Hopefully, the Broker Price Opinion has been completed and they are ready to talk. At this point, the negitator will tell you if the offer is in range, needs additional contribution from the seller or an increased offer from the buyer. The negotiating begins, concessions are made and final numbers agreed. This process could take another 2-3 weeks before the negotiator confirms that youhave met their needs. Don't get too excited, the offer still has to go to management (asset managers, investors and possibly mortgage insurers) for approval, typically taking an additional 2 or more weeks. Any one of these people can kill the deal and reject the offer. In the past two weeks, I have received calls from negotiators on two separate deals, asking for additional concessions or price increases after agreeing to our offer and concessions. After waiting 3 or more months, buyers lose interest and cancel their offers and sellers give up, often resulting in foreclosure.
Some Deals Are Getting Done
Year-to-date, 55 short sales have closed in Eastern Contra Costa County (Concord - Discovery Bay). This is only 5.1 of all closed sales. Some lenders, ARE getting it done. For example, I closed a short sale last in the past week with GMAC/Homecoming which was the lender for both the first and second loans. The process took about 2 months after receiving an all cash offer. We experienced a 3 week delay due to the assignment of a new negotiator after negotiations had been completed with the original negotiator. GMACs personnel appeared willing and committed to completing the process.
The Numbers Don't Lie
Today we have 4897 active and pending listings of which 1369 (28%) are short sales and 2073 (42%) are bank owned. With short sales equalling nearly two-thirds the volume of bank owned listings, lenders could save a significant amount of time and money if they treated the short sales with the same processes used for bank owned properties (set pricing & marketing plans with listing agents, up-front appraisals and broker price opinions, direct response from asset managers on offers). Losses caused by devaluation over time (6 months or more), accrued property taxes and HOA liens, foreclosure processing fees, vandalism, property maintenance, insurance and miscellanous fees often total more than $50,000 per property. Assuming a 50% close rate on these exisiting short sale listings in eastern Contra Costa county, lenders would reduce their losses by more than $34 Million.