Banks Take Losses on Short Sales as Foreclosures Soar
Short sales are less expensive and some banks are getting better at handling them.
Palm Coast, FL – December 4, 2009
By John Gittelsohn and Margaret Collins
Dec 4 (Bloomberg) – Banks are beginning to go along with short sales in increasing numbers, three years into a U.S. housing slump that pushed the economy into a recession and cut resale values by 30 percent from the peak in July 2006. Short sales tripled to 40,000 in the first six months of 2009 from the same period a year earlier. Yet for each short sale, there were 25 foreclosures started or completed in the first half of this year, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency.
“It’s really finally dawning on banks that they’re better off with a short sale,” said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “I think banks were in denial.”
Toby’s Commentary: Short sales allow lenders to dispose of properties without having to take possession first, avoiding transaction costs, maintenance and repairs, taxes, assessments, etc. It’s a much better avenue to take. It took longer than is should have for banks to catch on.
Banks are not getting better at anything
I am appalled at much of what the banks are doing and I do not understand it.
I have a list a mile long but primarily I do not understand why they are not negotiating more new agreements in cases where it is viable. They can put the past dues amounts on the end of the loan, lower the interest rate and have a performing asset.
Short sales
The problem with short sales is that you can wait many months, sometimes 6 or more and the bank can come back and want 50K or more than what the original price was to begin with. If you can wait that long and have the extra money sometimes it can be a good buy.. Most often once people know they are going to lose their home, they do no maintenance or take care of the home and a lot of unexpected expenses will hit you when you find out of problems that need to be fixed.. So Look closely at short sales..
Defaulter still on the hook
The nice thing for the bank is they still put liens on any assets the defaulting homeowner has. They simply took the lawyers out of the picture in the foreclosure process. For that the banks are actualy saving, as short sales are faster, and time is money. The non default, seller, has to have an advantage over the short seller, like a property in better condition, or they are subject to the "market" pricing of short sales. Of course realtors love short sales,which are usualy listed in the realtors multiple listing system and a commision is paid. Municilpal auctions, are devoid of real estate comissions, unless it is a buyer broker bidding for a client.
Short sale scam
While short sales are great for the lender and the buyer (and of course the realtor), it usually offers little or no benefit to the owner. In most instances, the owner is NOT relieved of the personal liability for a potential deficiency. Then why would anyone agree to it? The credit hit is about the same. You may actually be worse off following a short sale. Many short sales require that you consent to liability for a later deficiency. In that case, you are waiving potential defenses to the foreclosure as well as the right to challenge the property’s valuation in the post-judgment deficiency process.
If your lender will not release you from personal liability, I say don’t agree to the short sale. Don’t buy the verbal assurances that the lender won’t chase you.
Banks not only ones to Blame
We worked for a solid year to construct a short sale on the house we’ve rented for 5 years, but in our case, it wasn’t the bank (SunTrust) who failed to measure up. The bank appraised and valued the property and we met that appraisal value with a sale contract.
It was FANNIE MAE who refused even to communicate; much less, approve the sale. Consequently, the house (owner) was foreclosed upon and we will be out in January – ALL without even a tidbit of communication from FANNIE MAE.
short sale
To: Hilton Wiener, The owner has to initiate the short sale, it will not be forced upon them. It can not be done without their agreed involvement.
Want another short sale story. An investor owner asked us to do a Short Sale on her $329,000 property. After several months we got a cash $175,000 offer, the banks appraiser said it was only worth $175,000. The bank counter offered to the offer, if the owner would agree to sign a note for $30,000 dollars extra. Of course the owner said no and the buyer walked. Now two years later, after all the extra expense of maintaining the property, the bank foreclosed and put it on the market for $115,000. Go Figger. Now for all you folks out there that want, big business to take over public operations, I don’t think so. What is wrong with the Government, is the people from big business are already running it.