An October 1 article in Business Week suggests that homeowners may soon have one less option when facing foreclosure--a short sale. It seems that since some banks are slowly seeing their profits and ability to access capital improve, they’ve decided that they no longer need to be so generous in forgiving the difference between what borrowers owe on their distressed homes and the purchase price.
To this point, short sales have been viewed as a win-win in lieu of foreclosure for both distressed borrowers and the lenders they owe, since short sales do less harm to a borrower’s credit, and banks take less of a loss on the property than they would if they had to pay the legal fees to foreclose on it, then spend money for maintenance expenses before they could resell it.
But, even though signs of recovery are currently fleeting at best, some banks--even ones who can pass along losses to the government--have decided it’s time to get tough and are now requiring short sale sellers to either pay a portion of the loss at closing or sign a promissory note that will require them to pay it over a period of years.
The problem is, though, that this decision on their part could slow the fragile housing recovery. Since a record 33% of borrowers currently owe more than their homes are worth, and that number looks like it will only continue to rise since values are still falling. And, if short sales are no longer an option, the resulting increase in foreclosures will only depress prices even further.
Banks are taking, on average, 9.5 weeks to respond to short-sale requests this year, compared to 4.5 weeks last year. And, some banks that hold second mortgages are getting tougher too, sine they’re being hit hard by the deep reduction in property values. In some cases, they’re asking for 5% of the sale proceeds to give up their claim on a short sale, when often times in the past they were willing to accept next to nothing.
So, what does this mean for agents who are seeking to profit from our currently depressed market by processing their own short sale transactions? It means that having the support of a third-party source like The Agent Center behind them to help them learn the process, keep them up on the latest laws and regulations, provide them with the documentation lenders require, and offer proven marketing materials to help them find qualified buyers and get the deal done is that much more critical!
So, while it may look like lenders are losing interest in short sales for the moment, how the housing market responds to their actions will ultimately determine whether they keep up the tough-guy routine, or go back to using common sense.
The Agent Center Support Team
by Brian Wilcher, Staff Writer
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