How Short Sales Affected The Tax Credit Extension Debate...

Apparently, the huge number of short sales was a key factor in why Congress ultimately decided to extend the $8,000.00 tax credit deadline until September 30. In a letter to Congressional leaders on June 29, the National Association of Realtors said as many as 75,000 buyers and sellers were still awaiting bank approval of short sales or were coping with delays caused by third parties with responsibility for closing the transaction. Major news outlets such as CNN speculated that the complication of closing short sales was a primary reason so many people faced losing the tax credit benefit.

WPS knows this reality only too well...We track short sale statistics in the Greater Seattle and Puget Sound area, and we see than an alarming number of short sale transactions get stuck in the pending status and never get to a closing. This will continue to be a problem unless and until real estate agents get better education on how to handle short sales or hire professional third party short sale negotiators.

Maybe the Congressional tax credit extension debate will shine some light on this important issue.

Is a Short Sale Better Than a Foreclosure?

Washington Property Solutions is often asked about the benefits of a short sale versus foreclosure. In most cases, a short sale is considerably better. However, the issue is not about credit. Leave the credit conversation to a credit expert.

The pros/cons discussion should really be about how long someone will have to wait before buying again in the future.

We have combed through the latest information from Fannie Mae, Freddie Mac, FHA and VA to compare the financing waiting periods between short sales and foreclosures. You can see from the chart below, that in many, many instances a short sale is a better outcome in the long run compared to a foreclosure.

The Key To Navigating the Short Sale Process with Bank of America

Understandably, Bank of America has been the target of much criticism for how difficult they have been to work with in trying to successfully negotiate a short sale. Just this week nearly 100 angry homeowners took to the streets in Las Vegas, protesting what they call unfair treatment by Bank of America.

But since December 2009, Washington Property Solutions has utilized BOA's Equator Financial web-based system and it has been a great experience. Our ability to communicate with BOA directly through the Equator system is an extreme improvement on their execution and response time. Other lenders have been using Equator also and WPS has become proficient with each of their unique processes.

The system can be difficult to maneuver through, but we have been successful in learning the intricacies of the system. Previously Bank of America's short sale process could take up to 2 weeks for a file to be activated properly. Through the use of Equator we are now able to initiate the short sale process with Bank of America in less than a minute. We can upload the required documents directly into their system and get instant confirmation that they have been successfully received. The use of Equator has also eliminated the need for repeated requests for updated financial documentation from the sellers.

The new system does require that the sellers create an account and sellers do have required tasks assigned to them, but WPS is happy to assist all our clients to successfully navigate the system. At the seller's request, we are willing to take care of the tasks required for them if they are having problems or other time constraints.

Nice to see some positive developments with the Bank of America short sale process.

Loan Modification Track Can Lengthen Short Sale Process...

Keeping people in their homes is critical. Banks that can modify loans should, but the banks are too focused on loan modifications. So much so that if the homeowner mentions loan modification in a conversation with the bank they are put on a loan modification track that is almost impossible to alter. Okay I may be exaggerating a little bit, but the banks need to quickly determine if a homeowner can afford their home or not. If not, the banks need to be upfront and let the homeowner know their other options. If the homeowner determines that a short sale is their best, or only, alternative, then the banks need to put them on the short sale path. Currently the banks keep the homeowners on the loan modification path for weeks and months even after a homeowner has clearly indicated that they would like to move forward with a short sale instead.

Word to the wise, homeowners need to decide what they want to do, loan modification or short sale before entering into a purchase and sale agreement. Ideally, it is best if the homeowner decides before the property is listed. Unfortunately banks can't consider a short sale and a loan modification simultaneously. Homeowners should make their decision to sell or hold up front.

The Danger of Listing Your Property Too Low.....

When we teach classes on short sales we say, "throw logic out the window when you are working with the banks."

Keep in mind the current methodology used by banks in determining value before deciding on a listing price for your client's property. Generally, the bank(s) will send a real estate agent and/or an appraiser to the property to take some pictures, walk through and around the property and provide some comparable sales in the area. Sounds like a reasonable way to determine value, but the bank is forgetting one thing. This property now has a stigma. It's a short sale. The buyer pool for a short sale is significantly smaller. There is no mechanism to capture what this does to the value of the property except listing history. You can't compare this house to the identical one next door that sold for $400,000 but wasn't a short sale. But you have to because the banks do. If the bank determines that the value is $400,000 they will take less, but not a whole lot less. Listing the property at $325,000 because you are trying to attract interest will only get you a low offer that the bank will reject and you have wasted your time and more importantly your client's time which is running out.

Right now, as a listing agent, you need to work within the "realities" as they exist within the banks. Identify market value without taking into consideration the material fact that this is a short sale and list the property accordingly. If after 3-4 weeks you are not getting any offers or traffic then reduce the price. Maybe the banks will come to their senses and look at the listing history once you do get an offer. It is up to the person(s) negotiating the transaction to help the banks come to the appropriate conclusion.

Welcome!

We're excited to start blogging! We will strive to provide informative short sale information to sellers and real estate agents. Short sales are a crucial part of the real estate market and possessing the right tools and information is critical today for all real estate professionals.