Tag Archives: Bank of America short sales

Banks Revving Up For More Short Sales

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Banks Revving Up For More Short Sales

Because Bank of America is the largest servicer of residential loans in the United States, it seems quite reasonable they would have the largest number of foreclosures and for a few years that was true. A few years ago Bank of America announced it was stepping up its efforts to assist homeowners with short sales in hopes of decreasing the amount of foreclosures. It takes time to ramp up, hire, and train enough people to lighten that load, and it used to be said that Bank of America was the worst at processing short sales. That can’t be said any longer as they actually closed more short sales in 2010 than foreclosure sales, and since they automated and moved their short sale process to Equator, an online sales management software tool, the process has become streamlined and much quicker.

No, we didn’t say Ecuador, a country in South America. We said Equator, an online tool qualified agents can become certified in to assist homeowners complete sales transactions. Not every agent will handle a short sale, nor should they. A short sale is a very complex transaction where the bank, or banks, asks for specific documents to help them make a decision on whether to accept less than the full mortgage payoff.

Banks Revving Up For More Short Sales
SW Florida Listing Inventory

This is a very complicated process because there are tax implications for some homeowners and investors, and the banks may sometimes ask for deficiency judgments in others. It gets really complicated when 3rd party liens are placed on the property, like HOA liens or judgments against the creditor. These must all be identified and negotiated as part of the process.

Listing agents are reticent to list these properties as they are more time intensive, and there is no guarantee the bank will agree to a short sale. Further complicating the process, the bank surely won’t agree unless every I is dotted and T crossed to satisfy their guidelines. This generally requires a hardship letter explaining why a short sale should be considered, a letter of authorization authorizing the agent to deal with all the various debtors and lien holders, bank statements, etc. Short sales also take time, as you may be dealing with a primary lender, the investor behind that loan, FNMA, a PMI company, and perhaps a 2nd loan and investor or a home equity line of credit.

Buyer agents are also reticent to show short sales as they’ve discovered some sellers are not a candidate to sell short, or the listing agent isn’t qualified to take the sale to closing. The short sale isn’t a sale to practice on, it must be done by skilled, tireless agents with experience and extensive training with the banks. If you’re a short sale seller, be sure to interview your agent and make sure they are a CDPE (Certified Distressed Property Expert) or similar designation and have lots of experience working with different banks. Wells Fargo, Bank of America, Nationstar, BSI Financial Services, ASC, and others use Equator and expect the agent to be qualified on that system. Others, like Aurora, SunTrust, Ocwen, etc. use their own proprietary system to consider a short sale and the agent must know how to reach each and identify what each lender requires. Ideally this information should be obtained at the time of listing, not when a contract is accepted as this will further delay the process. Learning on the job isn’t a great option for buyer or seller, so working with a listing agent who has experience closing these sales helps all.

Banks today are even reaching out to agents asking to help with our short sales. Two of the largest banks are sending their customers letters on how they may be able to short sale rather than lose their property to foreclosure and they’re even recommending qualified agents to assist. A short sale is not something a For Sale By Owner can do, nor is the bank looking for that.

As you can see by the graph, approximately 31% of all single family home listings today in Lee County are listed as short sale. Listing inventory is going down, and so is short sale inventory because successful short sale closings are going up.

If you’re on the brink of affording your home or property, talk to a short sale expert. It’s amazing that of the foreclosures, 71% of the homeowners never reached out to anyone for help. Help is available, and a short sale is much better on your credit. With banks today getting better at the short sale process, it pays to ask for help. Call your agent today and ask if they can help. If not, don’t hesitate to call us and we’ll see if we can get you help now so it’s not a crisis tomorrow.

The Ellis Team currently has 3 CDPE’s on staff. A CDPE is a Certified Distressed Property Expert, which requires intensive training and extensive short sale experience to attain. To help gear up for the increased short sale demand, the Ellis Team at RE/MAX recently hired Marisa Morgan who worked many years as a long time banker with Bank of America and also in the title business. For years Realtor clients came to her asking advice on how to properly package short sales so the bank would accept them. She sat down and met with several sellers so they understood the process, so it makes sense to add Marisa’s experience to SW Florida’s premiere team to help sellers sell their short sale properties.

Brett discusses short sale issues with Marisa on this week’s Future of Real Estate show entitled “Banks Gearing Up for More Short Sales in Fort Myers, Cape Coral, SW Florida” Video.

SW Florida Short Sale Update

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As you can see from the graph, short sales have been on the uptick over the past two year period as lenders have geared up to handle more short sales. It is proven that banks lose less on short sales as the property tends to stay in better condition throughout the process, and the banks spends much less on attorney’s fees and vacancy on short sales than foreclosures.

SW Florida Short Sales
Fort Myers, Cape Coral, Lehigh Acres Short Sales

 

As you may recall, the government came out with programs like HAMP and HAFA as well as others, but none have been largely effective at curtailing foreclosures. You might ask yourself when has the government ever setup a big program that worked as the politicians said it would.

These programs were also mostly voluntary. Some of the banks have realized that selling a home as a short sale is in their best interests, and some must have decided it’s not. We wonder if perhaps banks don’t want to show losses on their balance sheet today, so they’d rather wait and take a bigger loss tomorrow on a foreclosure because the income statement can better handle it in the future. Perhaps the answer to that theory is best answered on a case by case basis.

Some banks have invested significant resources to address short sales. Bank of America for example has trained certain agents and put their entire short sales system online similar to how we work their foreclosure system. The beauty of an online system is that everyone involved can look at the file and upload their piece of information so the bank can make quicker decisions. We’re finding this system works miracles over previous antiquated fax and wait systems, only to find out the bank lost the fax.

Now there is accountability and tracking. Chase is another example of a large bank we’ve had good success with lately. Besides Bank of America, Wells Fargo, ASC, BSI Financial Services, and Nationstar Mortgage have also gone to the online system known as Equator for their processing of short sales. We expect to see significant improvements in the communication, processing, and closing times of the banks that have gone to online processing.

Banks such as Ocwen, SunTrust, and many others have been particularly difficult to deal with and take their time, even when they know the buyer has waited too long and is about to walk from the deal. There just doesn’t seem to be any sense of urgency or accountability at some of these banks and you get the feeling of indifference from them.

Nothing hurts a business more than indifference. A customer can receive bad service, but as long as they feel like somebody cares they’ll still repeat. When a customer feels like nobody cares, bad service is remembered and even talked about. Sometimes I wonder if indifference in tough times will be remembered by customers when the good times flow again and how this will affect these banks business in the future.

Each short sale is different though and even though we may be dealing with a bank, there may be an investor on the backend that just doesn’t want to accept less than the full amount owed. You would think by now most of these investors would look at the BPO (Broker Price Opinion), the appraisal, and the payment history of the borrower and realize doing the short sale may be in their best interest.

Sometimes we blame the banks, and believe me they deserve much blame, but we must remember that they also may be dealing with an investor and they’re just the middle man. It’s always easy to blame the middle man, but a little communication would go a long way in a tenuous process.

Short sales can also be complicated when there are liens on the property such as utility, or homeowners associations, property taxes, or even unpaid workers who worked on the property. Adding to the complexity is when we have to deal with multiple loans or home equity lines of credit, PMI companies, etc.

The short sale process isn’t easy for amateurs. While it is complex, we do salute the lenders who are taking it seriously and utilizing today’s technology to facilitate communication and expediency. It will be nice one day when we never have to do a short sale. Until then, it is the new normal so we might as well master the process, and that includes agents, lenders, appraisers, title companies, lawyers, and everyone involved in an intricate process.

Foreclosure vs. Short Sale

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It’s a fact that 7 out of 10 distressed home sellers go into foreclosure without visible intervention to improve their situation.  We speculate that sellers do not realize there is help available, and that doing something about their situation is better than just walking away.

Many sellers we talk to are embarrassed about their situation, while others are simply depressed and don’t wish to speak about it, hoping their financial situation will improve in time to change things.  The sad reality is once a homeowner falls behind; it’s very difficult to ever catch back up, even if their job situation improves.

We’ve been reporting about the new government HAFA (Home Affordable Foreclosure Alternatives) program announced on April 5 designed to improve short sales.  We’ve also told you that 2010 will be the year of the Transaction, either a short sale or foreclosure as loan modifications have not worked (use a personal loan calculator to work that out for yourself.

This past week we’ve met several large banks who have all committed to diligently approving short sales in a quick fashion.  Many agents and buyers have been reluctant to offer on Short Sales because the truth was they were really Long Sales.  This has changed and may now be a viable alternative for sellers and buyers alike.  If your loan is with Bank of America, Wachovia, or Wells Fargo, it may now be possible to streamline your short sale.  Other banks are following suit depending on who the end investor is on each loan.

We’ve provided a chart for sellers to illustrate the financial advantages of considering a short sale VS.  foreclosure.  Some of the details may affect you well into the future.  You may wish to discuss this with your attorney as well, especially if you’re considering bankruptcy.

Short Sale Vs Foreclosure Benefit Chart
Why a Short Sale May be better Financially Than a Foreclsoure

The good news is the short sale process has just improved dramatically, and while still very complicated, can provide relief for struggling homeowners and help them restore their credit so they can move on with their lives much sooner.  This economy will improve one day, and it will be nice when current distressed homeowners can look back and not be held down by circumstances of the past.  The short sale is one such tool to accomplish this.