Short Sale Statistics Report- 1st Qtr 2012

Short sales and the sale of bank-owned properties showed steady increases in the Puget Sound area in the first quarter of 2012, according to the Washington Property Solutions 1st Qtr 2012 Short Sale Statistics Report.

In the first quarter of 2012, short sales and the sale of bank-owned properties accounted for 40 percent of all home sales (single family homes and condominiums) in King County. That figure was up from 36 percent in the first quarter of 2011.

In Pierce County, the percentage of distressed property sales increased from 43 percent of all home sales in the first quarter of 2011 to 54 percent in the first three months of 2012.

The jump in distressed property sales was particularly high in Snohomish County where the percentage increased from 38 percent of all home sales in the first quarter of 2011 to 51 percent in the first three months of 2012.

The full report includes historical sales data for both Short Sales and Bank-Owned Properties in King, Pierce, Snohomish and Kitsap counties.

New Washington State Laws Benefit Homeowners Doing Short Sales

The last week in March, the governor signed into law some significant changes that benefit homeowners involved in a short sale or facing foreclosure. If you have a client in either of these situations, you will want to let them know how they might benefit from these changes.

▪ Time Limitation for Collecting on Deficiency

A lender agreeing to the short sale of an owner-occupied property must now provide written notice of whether it intends to either waive or reserve its right to collect on the deficiency. Also, the time period to start legal proceedings to collect on a deficiency has been reduced from six years to three years. Again, these changes only apply to short sales of owner-occupied properties. They do not apply to foreclosures. In the case of foreclosures, a lender has up to six years to collect on a deficiency.

▪ Referral to Mediation

Homeowners that qualify for mediation under the Foreclosure Fairness Act may now be referred to mediation up to 20 days after a notice of trustee sale has been recorded. Prior to the change in the law, once a notice of trustee sale was recorded, a referral to mediation was no longer available.

▪ Time Period for Trustee's Sale

The time period between recording the notice of trustee sale and holding the trustee sale has been extended from 90 days to 120 days. This change applies to owners of owner-occupied residential properties who are entitled under the law to receive a letter from their lender notifying them of pre-foreclosure options.

The above is just a basic summary of several new changes. We always advise homeowners to consult an attorney regarding how these changes will affect their own situation.

How Form 22SS Affects Lender Review of the Short Sale

I get questions regularly from brokers who are concerned about how the terms they outline in Form 22SS will affect how the bank reviews the short sale offer. Contrary to what you might expect, many lenders don't review Form 22SS at all. Banks will look at the contract, but they're not concerned with the terms. In a short sale, the bank alone dictates the terms, from sale price to closing date. They will look at the net proceeds, and also check to see if there is an addendum that outlines concessions that they will not allow, such as having a seller live in the property after the sale and pay rent. Concessions of this type will all but guarantee that the bank will not approve the sale.

While Form 22SS is of little consequence to the lender, it is critically important to your client. Form 22SS clarifies the process and terms that the buyer and seller agree upon in order to complete the sale. That includes:

▪ Whether timelines in the agreement- such as deposit of earnest money or inspection- begin upon mutual acceptance rather than the delivery of lender consent

▪ The number of days a seller has to deliver lender consent to the buyer

▪ The conditions under which the buyer can terminate the contract

It's very important to fully understand the implications of how you fill out the form. For example, in Paragraph 4 TERMINATION BY BUYER, if you check neither of the boxes, the buyer can terminate the contract at any time for any reason. With all these options and variables, Form 22SS can be confusing. If you need assistance with your transaction, we're happy to help. Call Richard Eastern at (206) 612-5541.