When I took that short sale seminar two years ago, the number of short sales that was actually getting approved was only about 12%. I don’t know the exact statistic right now, but I would say it is probably closer to 50% in the current market. There are several reasons for this. One is that banks are realizing it is often more cost-effective to approve the short sale than to take it on as REO. Second, agents and sellers seem to be pricing the properties a little better (closer to market value), instead of some of the insane “teaser prices” they used to throw out there. Third, the banks have had time to increase the sizes of their Asset Management Depts. in the last couple of years. When the distressed property crisis first started, banks had small Asset Management Depts. and each Asset Manager usually had a couple hundred files they were trying to juggle at any one time. Banks have now had the time to ramp up those depts. and there are now many more asset mangagers to handle the load. We went to a Real Estate Symposium last month at which we learned Bank of America alone now has over 18,000 people in it’s Asset Management Depts.! With the added employees, banks are now making an effort to give an approved price upfront (after the short sale package and “hardship letter” are submitted) instead of having to wait for an offer to actually come in. This should greatly speed up the process. For example, our quickest close on an “approved short sale” was only 45 days; whereas, our longest close on an “unapproved short sale” (which turned out to have problems with an unidentified second loan and unpaid taxes which were discovered after escrow was opened) took almost 8 months!
As I mentioned, banks seem to be doing what they can to speed up the short sale process. Also, according to an article in last week’s L.A. Times by Kenneth R. Harney, Fannie Mae and Freddie Mac are getting more involved in the process. “Starting in June, when you want to do a short sale to shed your mortgage and avoid foreclosure, you may not have to wait for months to hear back from your bank when you submit an offer from a potential purchaser.If your loan is owned or securitized by either of the dominant conventional mortgage market players – Fannie Mae or Freddie Mac – you can expect a response within 30 business days, with a final decision taking no more than 60 days. If you don’t hear back during the first 30 days, the bank will be required to send you weekly updates telling you precisely where the holdups are and when they are likely to be resolved. Banks and loan servicers that don’t comply will face monetary and other penalties. The mandatory timelines, which real estate and mortgage industry experts say should help speed up what traditionally has been a glacial process, are being imposed by the Federal Housing Finance Agency, the regulatory overseer of Fannie and Freddie in conservatorship.”
This is great news for a process that has here-to-date been VERY slow, ineffective, and confusing. Stay tuned for further updates; but in the meantime, I hope this article has been helpful in understanding the difference between regular resales, REO’s, and short sales. As always, don’t hesitate to call or email with any questions.
Coming next: “How to Get a Great Deal on an REO (foreclosure property)”