Wednesday, October 21, 2009
That transaction, in which borrowers sell their house for less than they owe, has earned a reputation as a frustrating morass with banks taking weeks or months to respond to offers and then often rejecting them. Because lenders swallow a loss on short sales, they have the ultimate say.
But now real estate professionals and banks say the logjam is starting to ease, with decisions coming more quickly, more short sales trading hands, and the prospect of a new Treasury plan that will further lubricate the process.
"A year ago I wouldn't touch a short sale," said Kevin Kieffer, a Realtor with Keller Williams Realty in Danville. "It would be random prices banks wouldn't agree to, you would be tied up six months hoping to get a property sold. But now we're seeing banks up front negotiating prices and giving us criteria. They're getting creative to make things move."
An analysis of Multiple Listing Service records by Emeryville's ZipRealty shows that short sales indeed are gaining ground.
From last September through March, about 600 short sales were completed in the nine-county Bay Area each month, accounting for about 9 percent of existing-residence sales. The monthly short sales topped 700 in April and May and has hovered around 900 to 1,000 a month since then, putting it at about 14 percent of sales. (Zip said the actual numbers may be higher, as not all short sales are flagged as such in the MLS.)
Cindi Hagley, a broker-associate with Windermere Welcome Home in San Ramon, said many banks are getting faster in rendering decisions on short sales, but others still take three or four months.
"The larger banks are coming to the table," she said. "My gut feeling is that short sales seem to be the preferred avenue for distressed property now. It's cheaper for them to do a short sale than go all the way to foreclosure."
For homeowners, a short sale provides a more dignified transition than a foreclosure - and will allow them to return to homeownership sooner. Fannie Mae, for instance, requires at least a five-year wait after a foreclosure but only two years after a short sale - and less if the homeowner wasn't delinquent.
Short sales are also better for the neighborhood because the home stays occupied instead of becoming a vacant foreclosure that may attract crime. And for banks, short sales let them skip the expense and time of going to foreclosure.
Several developments are helping to expedite the sales:
-- Pre-approval. Some banks are proactively deciding what amount they will accept for a short sale house. Sometimes they reveal the amount; sometimes they don't, but either way it expedites the process. Homes with this arrangement are listed as "Lender pre-approved short sale."
"It's an internal reserve price that lets us know the floor we'll accept on a short sale," said Dave Sunlin, senior vice president for foreclosures and real estate at Bank of America, which doesn't reveal the price for competitive reasons.
Considering options
At Wells Fargo, Ben Windust, senior vice president of default operations, said the bank is testing various short-sale approaches, including pre-approved sale amounts that it does reveal. That pilot is only for homes that Wells owns in its portfolio; homes owned by investors require more complex decision-making.
-- Proactive discussion with homeowners. Windust said another Wells pilot is to monitor real estate listings. "If we see we have a (Wells Fargo) borrower who listed property, if it's underwater, we might proactively reach out to them to work with us now on a short sale."
Similarly, JPMorgan Chase spokesman Gary Kishner said, "We are working on a more proactive approach to short sales by obtaining a listing of our delinquent borrowers who have their property listed for sale and then reaching out to help them sell the property."
Wells, Chase and other banks said it benefits homeowners to let their banks know early on that they want to pursue a short sale so the home's value, paperwork stream and other factors can be determined.
-- Treasury plan. In May the Treasury Department said it would offer a streamlined framework for short sales and incentive payments of $1,500 to homeowners, $1,000 to loan servicers and $1,000 to second-lien holders. That plan is supposed to be implemented very soon.
"As we understand it, it allows lenders to work with borrowers to mutually agree on how to market the property, set the price for it, gives us a fixed amount of time to sell the property and if not, converts it into a deed in lieu of foreclosure," said BofA's Sunlin.
-- Technology and staffing. BofA said it recently adopted a Web platform called Equator (formerly REOTrans) for managing short sales, as well as bulking up its short-sale staff.
But despite the progress, many short sales are still exasperating.
"Four of our offers are still out there in home-buying purgatory also known as the short sale," said first-time home buyer Travis Shinkle of Fairfield. He and wife Kasey made some of those offers as far back as May and the homeowner accepted them - but they're still waiting to hear from the banks.
Still obstacles
And even when there is progress, it doesn't always sound like it.
"Before you'd fax something 10 or 15 times before it would get anywhere," said Janelle Boyenga, a Realtor with Intero Real Estate Services in Los Gatos. "Now you only have to fax it in three or four times. And banks are ambiguous when they call: They said I could get back to you in an hour or in a month."
E-mail Carolyn Said at csaid@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/10/21/BUOG1A5M2P.DTL
This article appeared on page C - 1 of the San Francisco Chronicle
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