If you've been reading this blog - or any other real estate resource - for the past couple of years, you've been hearing a lot about short sales. I've been telling you for a while that we're seeing a slow increase in the market share for short sales, and I've been expecting that to continue. And now, I'm going to spew a little bit of bile on the subject.
One of my pet phrases when I'm trying to work with an intractable short sale lender is that I'm performing what I like to call a "Cranial-Rectal Extraction" (CRE) on them (well, not to them directly - that wouldn't be very tactful or productive). I've had some success doing that in the past, but it seems that more recently, but with some of these, we're gonna have to break out the jaws of life to get that done.
Look, I've said this before, and I'll say it again - short sales aren't the absolute hopeless mess that they were in 2007 and 2008. But you know what? The progress being made by the major lenders has been pathetically slow. We've been in this mess for a long time, and they've had 3 or 4 years to figure out how to deal with this and fix their processes. And they haven't. I keep hearing things from them that they're improving their processes, and frankly I'm reminded of those Domino's ads that were running last year. You remember those? The ones where they acknowledged that they were making some crappy pizza in the past, but now they've reworked their recipes and they're making some really good pizza now?
Well, you know what? When it comes to short sales, the major loan servicers are still making some pretty crappy "pizza".
It's not just me. I spent most of last week down in San Diego at the California Association of REALTORS® Winter Meetings, and short sales were probably the biggest topic of discussion. And the discussions that I heard at various meetings weren't exactly filled with nice things. From senior leadership all the way down, I was hearing a lot of frustration with how these things are working. I heard more than one of my fellow directors making noise about pulling all of their business - everything from loan referrals to their own personal banking - from banks that shall remain nameless in this space. I heard one or two of them echoing something that I've had occasion to ponder myself: they were about to make a personal business decision to swear off ever touching a short sale where (insert name of your least favorite lender) is involved.
I know, I know... These are complicated transactions, the loan servicers have to answer to the investors that actually own these mortgage notes (and there are tons of those). And there are also second lien holders and mortgage insurance companies to deal with on these transactions. And I don't care. I'm tired of hearing that they're getting better, and I'm even more tired of hearing why they can't fix things.
I've made this point here before: About 40% of all the homes in our market are in a negative equity position. We aren't alone, and in fact there are several areas where that number is much worse. And the primary way we're going to get out of that hole is through property transfers of these negative equity properties. That can happen one of two ways - short sales and foreclosures. And consider for a minute that at least from what I can see, foreclosures sell for about 15-20% less than non-foreclosures. And yet somehow, it seems that we're still seeing way too many situations where short sales get honked up and the property gets foreclosed. And that's not good for anybody.
So what to do? Government intervention? Yeah, that's gonna work... But on the other hand, the free market has failed us horribly on this count, and I can't help but think that if our political leadership could come up with some useful way to standardize the process and hold the banks accountable, at least it couldn't get worse. I suppose that those of us in our industry are going to have to keep engaging the banks, both at a leadership level and down here where the rubber meets the road. And keep working on that CRE - even if we have to break out the power tools.
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Hi Dennis!
ReplyDeleteYour short sale rant of course got my attention. You are right, short sales have gotten better since 2007 and 2008. Banks have accepted that they are going to happen and some of them will have large losses. There is another real estate blogger who recently wrote on the topic that said the banks should be up front at the outset about the files where they don't want a short and save us all a lot of trouble. I agree. The trend now is to use short sale processors who get paid according to how many files they are processing not how many files they close. Bad bank move.
Also of course the real processing of a short sale only takes about 2-3 weeks really, so there is no reason for a marathon each time.
Glad to know I'm not the only one that has considered pulling business from a bank due to how they have treated some of their clients in hardship. I wish I had been at those meetings now! Some banks do stand out as particularly bad, as they make you chase them down about almost every file.
There needs to be more accountability on time frames and we need a better policy answer to deal with second mortgage holders demands. It's not rocket science as to what needs fixin' at this point, we all know the issues. I'm with you -- less talking and more fixing is what we need. It's been awhile and we need some new problems just to keep things interesting. LOL.
Just my two cents. Excellent blog.
Tni LeBlanc, Broker
DRE License #01871795