Should the MLS Ban Short Sales?

In the comment thread on yesterday’s post there was some discussion about the ever-growing gap between pending sales and closed sales. Here’s a simple look at how they stack up through July (since August stats aren’t out just yet):

January - July 2009 Total King Co. SFH Sales

The massive difference between pending and closed sales brings up the question: Is there really a backlog of over 5,000 homes waiting to close?

Most likely no, there is no such tsunami of closings about to crash on the shores of the Puget Sound. This growing discrepancy is probably due to a couple of factors.

First, the redefinition of what is counted as a “pending sale” last year to include homes that have merely reached the inspection point naturally means that a larger number of these pendings will not close simply due to failed inspections.

However, the larger factor is probably short sales. Hundreds if not thousands of these pendings in limbo are probably due to a buyer making an offer on a short sale, the seller “accepting” the offer (at which point the “sale” is counted as pending) and sending it to the bank, and the bank simply never replying.

It is also worth mentioning that each of these 5,000+ seemingly dead pending sales represents two parties (the buyer and the seller) that have wasted their time submitting and reviewing offers. The situation is definitely not pretty. One of my coworkers recently purchased a short sale, and he went for months without hearing anything from the seller’s agent regarding the status of their offer. It took him threatening over the phone to drive his truck through the (vacant) house to finally spur some action by the seller’s agent and the bank (not a recommended course of action)!

One suggestion that was floated in yesterday’s conversation was that the NWMLS ban short sales in their system all together unless the seller has gotten a pre-approval from the bank on the list price. This would certainly save a lot of people a lot of headaches, and would probably overall help the market to be more efficient.

Have you had an experience with a short sale that completely died? What, if anything, do you think should be done about this growing problem?

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

96 comments:

  1. 1
    waitingforseattletocool says:

    Correct me if I am wrong, but the gap has been closing the last few months if I recall correctly.

    Why use the term “ever growing”?

  2. 2
    David Losh says:

    Great post that is a little misdirected. If your point is about data then yes the short sales need to be included because the point of data is to have a track of the market place. You are correct that the pending inspection status on a short sale that will never close is deceiving, I have one now that will go to foreclosure auction next week. The negotiator is desperate to make a deal, but is uncooperative on the terms.

    My opinion is that short sales should be a separate category or taken out of the Multiple system because Real Estate agents are ill equipped to deal with a bank, seller, buyers, and all of the legal issues that I see as liabilities.

    Here’s an example: a client referred me a buyer in 2007. His coworker was selling a house and he thought he should buy it. I said no. Another Real Estate professional wrote it up. Fine. 2008 he wants to sell. The house is losing money. he has his same job, he asks me, I say ride it out, and another Real Estate professional lists the property as a short. The price is low, he gets multiple offers, and the deal closes six months later. I suspect there was some fabrication of the hardship letter. Possibly his income never was enough to cover the mortgage so his financials looked fine to the bank.

    Now who takes the liability for this transaction? The person who wrote the deal for the purchase when the buyer had inadequate income to qualify, or the listing agent who may have fabricated a hardship, I don’t know that for a fact, or the bank for making a loan, or accepting a short. No matter what it is a liability some place for some one and I don’t think Real Estate agents should be involved.

    My main beef is with the banks. I think there is a lot of accountability that needs to be paid. Banks have been reckless and are continuing to be playing fast and lose with investor dollars.

  3. 3
    Kary L. Krismer says:

    The banning comment was mine, and it was made not only in response to one of David’s comments, but also out of frustration. The current situation is not good, and except for the repeal of the distressed property law as it applies to agents, it’s not getting any better. Something needs to be done, and there are only three groups that can do something:

    1. The banks themselves.
    2. Government.
    3. The NWMLS.

    I don’t expect the banks to do anything. They’re business as usual, my way or the highway types of entities.

    Government did pass some new laws, and I’d expect them to pass more laws. This is probably the best area for hope, because government controls the non-judicial foreclosure process, and that’s a process banks want to use. That’s also the only means the state has of controlling National Banks.

    The NWMLS has been weak so far, but there are things they could easily do (and no, I don’t expect that they would ban short sales, even if that might make things better). They could ban the process of not removing listings from active when the seller has an offer that is acceptable to them. This would be a great aid to the sellers who have agents who do this practice, because the seller’s chance of getting a serious offer from a serious buyer is greatly reduced with the practice. They could totally segregate short sales out, so that there would be a “Pending-Short Sale” category that wouldn’t be included in the pending stats. But that would only help the stats, not help sales actually be approved or declined by banks.

    Rather than focus on the banning idea, I’d be interested in what other ideas people have to solve the short sale problem, which I’d define as banks not processing the offers so that sales can either close or be terminated.

  4. 4
    deprogram says:

    I’m not even looking at short sales, simply for this reason. I think the seller should definitely be required to get approval from a bank for a sale price, but I’m sure the banks will be just as recalcitrant on this as they are when someone actually makes an offer. If there is an agreement between buyer and seller, and a fixed amount of money at stake, you’d think they’d be able to make a decision. But, of course, they can’t (or won’t).

    I’m sick of Redfin being polluted by shorts that are not listed as such by the listing agent, and having to bother my agent to find out the real financial situation of the seller.

    As they are, shorts are pretty much worthless, and a huge waste of time. Banks are using red tape to hold together the dam shoring up their toxic assets – and we’re pouring taxpayer dollars into the mess above the dam. They’re just stalling for time, simply because they CAN.

    I’d love to see this issue resolved. Along with some public flogging of banking executives. Not holding my breath on either point.

  5. 5
    Kary L. Krismer says:

    RE: David Losh @ 2 – Wow, I won’t say I agree 100% with that, but I’ve probably never agreed with so much of such a length comment before.

    As to the agent issue, I only sort of agree. The problem with the original distressed property law was it took most of the best agents out of the game, and brought in a bunch of other scumbags that would assist the agents that remained in handling the sales. Doing a short sale is sort of a specialty, and as such, there’s no reason that an agent couldn’t do the job properly, but that involves referring the client out for legal and tax advice, and refusing to take the listing if they don’t get such advice. So agents still have a role to play in doing short sales, but it should only be a handful of experienced agents that do them.

    Connecting up, with so few sales being processed by banks, the best agents will lose interest in doing short sales.

  6. 6
    Kary L. Krismer says:

    RE: deprogram @ 4 – It can be very difficult to get a bank to even talk prior to an offer coming in. You sometimes see listings that say the price is approved, but I’m not sure those claims are correct, unless perhaps the bank approved a prior offer and the buyer walked. If there are banks giving prices in advance, that would be a very good thing.

  7. 7
    AMS says:

    If we keep the percentage of failed transactions the same (in other words, the percentage of sales that close after the offer is accepted remains constant), then the increase in the gap can be explained by the duration between when the sale goes pending and closed.

    In a “hot” market (whatever that might be), the time to close is going to be relatively short, so the difference between pending and sales will be small. As the time to close increases, again holding the percentage of failed transactions the same, the difference between pending and closed will increase.

    I can actually envision that the number of pending might go below the number of closed in November in some markets, possibly not Seattle. Clearly the current (instant) number of pending has nothing to do with the historic (a month) of closed transactions.

    What would be better is to know the percentage of failed transactions (with a nice definition of such).

    This discussion reminds me of those who don’t understand an income statement versus balance sheet. The income statement is over some time period, but the balance sheet is an instant snapshot.

  8. 8
    Scott Weitz says:

    If you take the Short sales off the MLS, there would be a HUGE % of properties moving forward that would effected….you simply can’t alienate short sellers like that.

    My suggestion:

    1) Realtors/ NWMLS need to step up their education on the matter promptly. I presume many already are.
    2) Banks need to stream line the process. They should be required to give approval or disproval within two weeks, or the deal would be deemed approved.

  9. 9
    SpringStreet says:

    I am completely without knowledge of MLS rules here, but is there a “good faith” requirement for listing agents?

    I am rending a high-end condo unit today and have been surprised by the inferior quality of my specific unit’s MLS entry – it feels deliberate.

    Nowhere does the listing indicate that it is a) a short-sale, b) there’s a renter who has a lease that acts as an easement on the property, c) whenever the short sale price drops, the listing agent removes the square footage for a few days – I can only assume to distort price/sq. ft. calculations to drum up temporary interest. The sq. ft. appears days later.

    Is it possible that this information is contained in private MLS fields that is unavailable to the public?

  10. 10
    Kary L. Krismer says:

    RE: AMS @ 7 – I’m not really understanding your first two paragraphs. First, I don’t think you can assume the same percentage of anything. Second, I don’t know why the time pending would be shorter in a hot market. The time active would be shorter, but the time pending would be typically the same.

  11. 11
    David Losh says:

    RE: Kary L. Krismer @ 6RE: Kary L. Krismer @ 5

    OK I could be one of the scum bags assisting agents, but everything went sideways with the number of people giving agents short sale classes. Banks thought they had a whole new group of suckers to play with and they did. Prices stalled then went up for banks selling short. They would ask for concessions and get them. It’s a circus. Banks are doing very well in the short sale process today.

    These professional scum bags deal with banks in bulk which is what banks want. Banks want to clear files and if they have a clearing house then they like that. If a bank can negotiate with one person on multiple files and get everything they need to get the file closed, they like that. Volume is good for every body. Most scum bags have the ability, and this is where the money is, to close for cash to resell.

    Close for cash to double escrow and take a $5K to $50K profit is what the true scum bags are all about. It’s all numbers. that’s what the banks know, and what they want to do. As soon as the investor in the Note says OK they want to close now, not two weeks from now.

    It’s complicated beyond an Real Estate agents ability. Most agents have absolutely no clue how to get a deal done.

  12. 12
    Indy says:

    The easy answer is just to add that additional granularity to the data which would segregate short sales from normal listings, allow for specialized definitions of “pending” and so on, and not corrupt the related statistics for the rest of the housing market by misleading aggregation.

    Nothing changes except more truth – which is usually the path of least resistance to progress.

  13. 13

    Read the Short Sale Contract

    Why would you want to take a credit rating hit in today’s tight money and simultaneously have to rent and still owe money on the old short sale house?

    Banning short sales is a moot point IMO, since still owing money on a house you just handed the keys back to the bank on is ludicrous and why would anyone in their right minds do it?

    Does anyone have the credt rating impact of short sales versus just simply defaulting? IMO, its a moot point.

    A little birdy is telling me this is just another Ponzi Scheme against the buyers to keep home values artificially high.

  14. 14
    Kary L. Krismer says:

    Here are some numbers which are pretty meaningless, because to know for certain what’s happening with short sales you’d have to track individual short sales through the NWMLS system. These are King County, SFR short sales, and as usual, not compiled or guaranteed by the NWMLS. All numbers are since 8/1/09

    New short sale listings–under 300
    New pending listings (and status)–over 400
    Expired–under 50
    Sale Fail Release–under 50
    Canceled–under 150
    Sold–under 100.

    If you add the sold, canceled, SFR and expired together (the exact numbers), it adds up to almost exactly the new listings, but no where near the new pendings. So is the “problem” getting worse or staying the same?

    And to put this in context, there are over 1100 active short sales and over 1000 in some state of pending.

  15. 15
    patient says:

    i like the idea of a separate category where short sales are not part of the “normal” inventory since it’s often unclear if these homes are for sales at the listed price and that they are also not part of pending sales until the bank has agreed to an offer.

  16. 16
    Kary L. Krismer says:

    RE: softwarengineer @ 13 – Banks can release the debt as part of the short sale, but you have to get that to be part of the deal.

    And I’d add I’m not sure why you think it keeps the prices high, since it limits the interest of buyers.

  17. 17
    Nell Plotts says:

    I have no issue with short sales on the MLS but I don’t think they should be included in the inventory or sales data along with other listings. Have two classes of properties: short and other.

    Along this same vein, how are auction properties handled? Odds are re-sale auction properties were at one time short sale properties or listed as bank owned. Are they simply withdrawn properties in the mls data and not tallied at all?

  18. 18
    mukoh says:

    Well a short sale that my friends were buying took all of seven months and was approved a couple of weeks ago. That is 7 months of going back and forth with the bank. The whole time property sat Pending.

  19. 19
    AMS says:

    RE: Kary L. Krismer @ 10

    Example 1:

    10% failure rate, 30 day average to close, infinite time (in other words the game began long ago and there is no end).
    (after many months of history, I will begin renumbering at 1)

    Month 1: 100 Offers Accepted, 90 Closures, 10 failures
    Month 2: 100 Offers Accepted, 90 Closures, 10 failures

    Month 12: 100 Offers Accepted, 90 Closures, 10 failures

    This is an initial value problem. Whatever the initial value of the pending sales was at month 1, we will have the same number throughout the entire period. (Take 500 pending at the start, we have 500 pending at the end.)

    Example 2:

    (after many months of history, I will begin renumbering at 1)

    Month 1: 100 Offers Accepted, 90 Closures, 0 failures, 10 additional “pending”
    Month 2: 100 Offers Accepted, 90 Closures, 0 failures, 10 additional “pending” for a total of 20

    Month 11, 100 Offers Accepted, 90 Closures, 0 failures, 10 additional “pending” for a total of 110
    Month 12: 100 Offers Accepted, 90 Closures, 120 failures

    Note that this is essentially the same as Example 1–an initial value problem, but we have the following pending:

    “Pending” Numbers:
    0 – Start at the Initial Value
    1 – Initial Value + 10
    2 – Initial Value + 20

    11 – Initial Value + 110
    12 – Initial Value

    (Month 12 is the Initial Value + 110 carry forward + 10 added offers for month 12 – 120 failures = Initial Value)

    Example 3:

    Failure rate stays the same, but time to close increases:

    Month 1: 100 Offers, 0 Closes, 10 failures (Pending is now initial value + 90 (100 minus 10))
    Month 2: 100 Offers, 0 Closes, 10 failures (Pending is now initial value + 180 (200 minus 20))

    Month 6: 100 Offers, 0 Closes, 10 failures (Pending is now initial value + 540 (600 minus 60))
    All Parties get their act together
    Month 7: 100 Offers, 630 Closes, 10 failures (Pending now initial value)

    NOTE: Sudden decrease in pending sales at the end of month 7.

    Note that the failure rate stays the same (10%). The number of offers stays the same, but the monthly data is much different.

    And so on and so forth.

  20. 20
    AMS says:

    RE: Kary L. Krismer @ 14 – Can you get the definitions of each of these? I am not a REALTOR…

    We need to make sure we have mutually exclusive categories, and we are going to have to be very careful with initial values, and the way the data is measured.

  21. 21
    patient says:

    Our favourite comparison market San Diego might get some further insight. I remember reading an article from an agent there a while back that proclaimed that the golden days where back, it was just to sit back and ring the register as a backlog of 15k homes or something to that order was waiting to close. Since they probably have had the short sale phenomena much longer than us their traditionally slow selling months ought to have had closings way above pendings should that reasoning be accurate.

  22. 22
    The Tim says:

    RE: AMS @ 19 – That’s not how “pending sales” are counted. The number of “pending sales” reported by the NWMLS at the end of the month is the number of listings that changed from “active” to “pending” in that month only, not the cumulative number of listings in that state as of the last day of the month.

  23. 23
    DrShort says:

    Short sales are under represented in the MLS because, at the time of the listing entry, many sellers think they can get a lot more money for their house than the market will generate. It isn’t until a couple of months of sitting on the market with no offers that the seller begins to realize that they too are a short sale seller.

    There’s a lot of delusional sellers out there. And most delusional sellers won’t list their house for less than it will take to pay off the mortgage. These listings aren’t technically short sales, but any market offer would result in a short sale.

  24. 24
    deprogram says:

    By Kary L. Krismer @ 6:

    RE: deprogram @ 4 – It can be very difficult to get a bank to even talk prior to an offer coming in. You sometimes see listings that say the price is approved, but I’m not sure those claims are correct, unless perhaps the bank approved a prior offer and the buyer walked. If there are banks giving prices in advance, that would be a very good thing.

    My agent says he has never heard of a bank pre-approving a sale price for a short. However. Times have changed, so I guess it’s possible. I HAVE seen it in at least one listing, but didn’t follow up since it seemed so improbable.

    Yeah, I’ve seen it in listings too, and suspected the same scenario – financing fell through for the buyer, or inspection revealed something and the buyer backed out. I still don’t think you can just slice through the red tape, though, in some magical manner. Maybe.

    The competition for foreclosed homes at the bottom end of the market was pretty fierce. Hardly surprising – they offered a solid discount and a fast response time from the bank. I know foreclosure isn’t fun for the person losing the property, but it certainly speeds price correction. Again… why the banks aren’t foreclosing as aggressively or even keeping foreclosed properties off the market and on their books at their ‘assessed’ value.

  25. 25
    AMS says:

    RE: The Tim @ 22

    Is there a source to how this data is generated? If I remember right, I read on this board that the methodology shifts without notice–is my memory correct?

    In any event, if it’s only for that one month, then we need to go this way:

    Month 1: 100 Pending (some of these might close/fail in month 1)
    Month 2: Part of the 100 could close/fail
    and so forth.

    Now we get a good actuary to tell us when the homes will close in the future, and buy an insurance policy, like what brought Bear Stearns down…

    With that said, if the data only represents the one month, in the past, then what meaning is there in the difference between closed and pending?

    (Once again, I am an analyst, not a REALTOR…)

  26. 26

    RE: David Losh @ 11

    I ‘d sure like to see ” Professional Scumbag” on someone’s business card.

  27. 27
    deprogram says:

    By SpringStreet @ 9:

    I am rending a high-end condo unit today and have been surprised by the inferior quality of my specific unit’s MLS entry – it feels deliberate.

    Hah! You’re surprised at a poor quality listing? You shouldn’t be.

    I’m curious as to why you care about your condo’s MLS listing if you’re renting it? Do you want to buy it? Do you want someone else to? I don’t quite understand.

  28. 28
    Matt Silver says:

    Short sales should stay on the MLS as they are still a legitimate listing. They should always be listed as a short sale!

    Banks will not start a short sale or approve a price without an offer. The mistake that Realtors and attorneys are making with short sales are that they are a FINANCIAL TRANSACTION NOT A REAL ESTATE TRANSACTION. To the banks, it is simple profit or loss on a note.

    In my opinion agents should maintain their position as Realtor and not leave themselves open to legal liability problems. Yes, you probably could handle doing the short sale, but what is the advantage? Extra work, extra time, legal liabilities, and cut commisions.

    Look at it this way. If an owner approached you as a Realtor and asked why they shouldn’t just list as an FSBO, what would you tell them? You are a specialist, you know the ins and outs of selling property, you know the bumps and potholes, and can guide the owner through the transaction. It is no different with companies such as mine that specialize in the short sale process.

    A simplified way of how we solve this situation is to initiate the short sale process using an investor as the buyer. We handle the negotiations with the bank on behalf of the buyer. Once the short sale is submitted, the property listing is canceled and removed from the MLS. A new listing agreement is created on behalf of the investor/buyer to secure an end buyer. The investor has equitable interest and rights to list the property and is listed as a short sale with third party approval. While the short sale is being negotiated with the lender, the property continues to be marketed and reduced in price until an offer is approved. Once the lender has approved the short sale, the MLS can be updated to show “short sale approved”. In the end there are TWO separate arms length transactions and closings.

    The advantages of this scenario: The listing agent gets to concentrate on marketing and selling property. The owner has an immediate, legitimate offer. The owner’s short sale gets negotiated with a non-deficiency judgment as “paid in full”. The property gets marketed at a reduced price that will ensure it sells quickly. The investor and negotiation company gets paid by the spread and not out of any parties pocket. Prospective buyers don’t have to wait out the short sale process and possibly walk away. The Realtors receive FULL COMMISSIONS on the 2nd transaction.

    Matt Silver
    [Read the comment policy: “no commercial links may be left in the body of the comment.”]

  29. 29
    AMS says:

    RE: The Tim @ 22 – Put differently:

    How can we match one month’s “pending” to many months of “closed?” The current month’s closed is from, at least potentially, many months of past pending (not bounded). There is some duration (mean), failure rate, maximum closing time, minimum closing time, median closing time, and so on. I guess we could go further and think in terms of weighted transactions. Small value transactions are likely to close earlier (I’ll quickly pay cash for a home that I place a high value on, yet the price is very, very low). As long as the mix remains constant, then we could make some nice assumptions to make some conclusions, but these are subject to assumption risk.

  30. 30
    Markor says:

    My theory is that banks have been delaying their replies in part to see if house prices go up due to the stimulus. If yes, then disapprove and wait for another buyer; otherwise approve to lock the seller in at a higher price.

  31. 31
    Kary L. Krismer says:

    RE: AMS @ 20 – They aren’t mutually exclusive at all, but there should only be one property in each category at any one time. I’m giving a snapshot, which is why I said the numbers aren’t that useful and you’d need to track the properties individually. For example, a property could go pending, then back active, then canceled, all since 8/1/09, but in the numbers I gave they would only be counted as whatever they were an hour or so ago.

  32. 32
    Jillayne says:

    Software engineer re comment 13 as to how a short sale effects a person’s credit rating, FICO will not release any hard rule as to how many points a person’s credit score decreases due to any of the three major negative events: Short sale, foreclosure, or bankruptcy. They do however, have a great page that explains how such an event might lower a person’s score. It all depends on the mix:
    http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

  33. 33
    AMS says:

    RE: Kary L. Krismer @ 30 – Now we have a difference between what The Tim claims,

    By The Tim @ 22:

    RE: AMS @ 19 – That’s not how “pending sales” are counted. The number of “pending sales” reported by the NWMLS at the end of the month is the number of listings that changed from “active” to “pending” in that month only, not the cumulative number of listings in that state as of the last day of the month.

    And your claim:

    “they would only be counted as whatever they were an hour or so ago. ”

    gah.

  34. 34
    patient says:

    About public flogging of banks…I’d have to agree, they have proven to be the wmd’s in this era and it’s time to bring the “evil doers” to justice in true American spirit.

  35. 35
    singliac says:

    Ira, that new banner ad is hilarious. Nice work.

  36. 36
    AMS says:

    By Jillayne @ 31:

    Software engineer re comment 13 as to how a short sale effects a person’s credit rating, FICO will not release any hard rule as to how many points a person’s credit score decreases due to any of the three major negative events: Short sale, foreclosure, or bankruptcy. They do however, have a great page that explains how such an event might lower a person’s score. It all depends on the mix:
    http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx

    This is part of the reason, in my personal opinion, that we are in the condition we are in. If the details were released, then investors/lenders could actually know what they are investing in, rather than some number. Moody’s has legal problems related to credit ratings, and the unexpected losses related to such. The basic question posed by investors is why did Moody’s rate some debt as very safe, but there was a sudden and catastrophic failure. I am sure there are similar problems in Fair Issac’s methodology.

  37. 37
    mukoh says:

    RE: Markor @ 29 – Markor, from what I gather talking to banks as far as commercial/wholesale is that they are swamped.

    For example on retail one loss mitigation department person handles 120+ files and works on approving them with investors. The process is as dumb as it can be, they literally have a stack of files and she works on them only one at a time. Takes one off the top negotiates for a week or longer depending on investor and/or offer. Moves onto the next one. If she gets a call on a file in the middle that she actually takes the file to look at it and do some leg work once she is done she puts it towards the end of the pile. Her longest time frame is five months right now. I think its nuts. She actually orders appraisals on some files and on a few a double appraisal. Those are two/three weeks out.

    The banks I think are well aware that prices are not bumping up any time soon. What they are dragging is labor and resources, in reality they are taking a loss on every one of these thus they want to extend IMO how much of a loss they take before next FDIC audit. On one deal that I had a couple of months ago the bank took 50% loss. It was a rare ordeal. Took literally three months to just tune up the contract, it was 62 pages after both sides got done with attorneys.

  38. 38
    The Tim says:

    RE: AMS @ 33 – No inconsistency. I am referring to the NWMLS month-end reports. Kary specifically stated “in the numbers I gave,” referring to the data he just personally pulled directly from the NWMLS database.

  39. 39
    AMS says:

    RE: The Tim @ 37 – Oh, I thought the methodology was the same for both. I stand corrected. Thank you.

    In any event, I suspect that the official data is crafted and reported to support the MLS sales machine. As such, we can make little conclusions, except for the follow: “Now really is a great time to buy and sell.”

  40. 40
    Jillayne says:

    Hi Kary,

    The banks can’t be forced by government to process short sales faster. The politicians can make noise but unless government is running the banks, the banks are going to do what they need to do to stay alive another quarter and collect their paychecks.

    We shouldn’t hold our breath that banks will hire and train enough people to process short sale (or loan mod, or foreclosures) faster. Loan servicing use to be a profit center, now it’s bleeding red big time. Working in the default department is a super high stress job. Imagine having to report to work at 8AM, stay until 5. You get two, 15-min breaks and an hour for lunch. Beyond that, the rest of your day is spent picking up the phone and being yelled at by Realtors all day log. High stress = high turnover. Not too far above min wage work, either. No experience necessary to land one of these jobs. The banks will have a continuing staff challenge for the next 10 years (I’m a little closer to Ray’s opinion on that one.)

    Maybe short sales could get processed faster if incoming calls from Realtors were limited to 1 per week and banks would agree to talk to an agent only if they knew what they were doing. Maybe the banks could create an online class for Realtors processing short sales and ONLY when the agent has finished watching that video and taking a comprehensive quiz in English would the bank talk to that person. Hey, banks create online classes for their retail staff all the time. This could be extremely cost effective.

    Part of the mess in loan servicing could possibly be traced back to talking with listing agents for the seller who take the short sale listing….and who have NO IDEA what they are doing. Now loan servicing has to “train” each of these agents how the process works.

    Instead of looking outward at government, banks, and the NMLS I say let’s look inward at the Realtors themselves and how the complaining industry can transform to adapt to this new short sale world.

  41. 41
    Jillayne says:

    I wouldn’t expect the NMLS to change their policy any time soon. It took them years to add two buttons to the agent input screen and require that we identify short sales and bank-owned foreclosed REO properties when listing.

    Dues come from members and then we would want to ask the question: Would it benefit the members to break out short sales from the pending numbers? If this would benefit the members and the members want it, then they will do it.

    Question for an NMLS member: Is it possible for an agent/nmls member to go into a specific area like King County, run a report on pendings and manually see how many are short sales and if so, how much time would this take?

  42. 42
    The Tim says:

    I would also like to point out that while some of the comments here are getting into the stats question of separating the short sale pendings from the “normal” pendings, that was not intended to be the thrust of my post. I was asking the question of whether short sales should be banned not so our stats can be cleaner and more useful, but just because of all the time people are wasting dealing with non-responsive banks. It makes the whole market terribly inefficient, IMO.

  43. 43
    AMS says:

    RE: The Tim @ 42

    I am suggesting that the data be kept, but additional metrics be provided so that we have a better understanding of the market. Rather than a “ban,” how about providing separate data:

    1. Total Market
    2. Short Sales
    3. All other sales

    Where the total market is comprised of the combination of short sales and all other sales, and short sales and all other sales are mutually exclusive.

  44. 44
    Sniglet says:

    Are short sales really the primary contributor to the discrepency between pendings and closed sales? I was under the impression that a far higher portion of “normal” deals (i.e. that aren’t short sales) are falling through than we’ve seen in the last decade due to growing problems with getting financing and such like. I suspect that there are a fair number of deals that fall apart these days simply because the buyers weren’t able to secure financing.

    As far as “banning” short sales go, I agree with Jillayne: I doubt there is anything the government can do to either stop, or speed up, the process. It is all up to the lenders. Unfortunately, I just don’t think lenders have much incentive to want to make short sales particularly easy. It is difficult for lenders to make sure they are getting a fair price for a home in a short-sale situation, and there are plenty of cases where the short-sales were even rigged, allowing the buyers to get a steal.

    More importantly, the easier short-sales are to conduct, the less incentive under-water home-owners will have to try and make things work on their existing mortgage. It is preferable to have some homes go into outright foreclosure than it is to create incentives that encourage large numbers of home-owners to bail on mortgages they might otherwise have kept current if the consequences of default were severe.

    Thus, it is in the bank’s interest to make short-sales a hell-on-Earth, as it were, to serve as an example to any other miscreants who might be thinking of bailing.

    Lastly, there is also the case where some lenders would prefer to have a non-performing loan, and deadbeat borrowers, rather than recognize any formal loss for the mortgage on their books. For banks that are on the edge of solvency (and there are a lot of institutions in this category today), it is better to just let defaulting mortgage holders live “rent-free” than to either conduct a short-sale or foreclosure.

    When I see what is happening to people like my sister (i.e. where the lender still hasn’t foreclosed on her Florida home after nearly two years of non-payment), I wonder if these dead-beat borrowers couldn’t get the lenders to pay them money not to move and mail in the keys. After all, the bank is benefiting from being able to list fictitious values for the property, so the deadbeat borrower should be compensated for allowing the lender to maintain the ruse.

  45. 45
    patient says:

    I think it’s good if any property that is for sale can be found in one place, the mls. However as many have pointed out separated into 4 categories. Short sales, reos, fsbos and “standard”.

  46. 46
    Gustopher says:

    Short sales should definitely be segregated in the MLS — it’s a waste of everyone’s time to treat them the same as regular sales, so long as the banks are still taking forever to process offers.

    When I was looking for a house recently, I didn’t get to the point where I ignored all short sales, but I had decided that if I fell in love with a house that was a short sale, I would make a low-ball offer, and keep looking — maybe the bank would act quickly, maybe they wouldn’t, or maybe I would fall in love with some other place in the meantime and rescind my offer before they got to it.

  47. 47
    ray pepper says:

    Well, I’m knee deep in short sales for clients and I offer this.

    As an agent if my Buyer wants a short sale purchase I will advise of the RISKS and the REWARDS. I will NEVER deter my Buyer from looking at short sales nor should they.

    In 2010 shorts sales will be cleaned up and the process stream-lined. (This is my personal opinion.) We just closed one that took 8 months but in the end our short sale buyer was very happy. (He also got to live in the home for free for many months up to close.) Between the inept listing Agent and the Negotiator I was forced to set up formal meetings with the listing agent’s Broker and Counsel to clarify that my Buyers interests were still being maintained and we were still on a path to close.

    Short sales offer a great value potential as well as foreclosures, auctions, and other distressed sellers. Never overlook them and find an Agent that will support your purchase whatever it maybe.

    ** However, the problem lies with the listing agents who accept these listings. Many are clueless as to what their expectations are and make many false promises to ALL involved.

  48. 48
    DrShort says:

    Question 1 on the Form 17 asks if “you are authorized to sell the property”. What happens if someone checks no? In a short sale situation, the seller really isn’t authorized to sell.

    In an ideal world, the bank would approve a short sale and listing price prior to putting the property in the MLS. It’s quite rediculous to put a house up “for sale” when the seller has no idea if they are capable to executing on terms of the purchase and sale agreement.

  49. 49
    AMS says:

    RE: DrShort @ 48 – It is quite often the case that real estate is subject to some lien. But the owner is authorized to sell, subject to the lien, of course. This holds true no matter how high or low the value of the lien.

  50. 50
    mukoh says:

    RE: DrShort @ 48 – DR Short. Typically in short sale transactions at least with experienced people the form 17 contingency doesn’t even start until the bank approves the short sale, thus post approval the seller has written authorization to proceed.

  51. 51
    AMS says:

    RE: mukoh @ 50

    If my asking price is just sufficient to cover all expenses, including the lien, then I am fully authorized, but if I am a few bucks short, then it’s being suggested that I shouldn’t list without approval? What if I simply ask a few dollars more, then problem fixed, right? This should work when I price the property far beyond local market conditions…

    BTW, I have been tracking a specific property for about 2 years. It originally was listed at $335k. Today 210k. When the asking price was $335k, it was not short. Today, very short.

  52. 52
    Mariner22 says:

    When you buy a stock on an exchange, no one cares what the original cost basis for the seller is – If I want to buy 100 shares of Microsoft, it is $2400 give or take based on today’s price. The original seller may have bought the stock in 2000 at $50 dollars a share (or even worse, bought it on margin in 2000 and paid interest all the way down) or might have bought it more recently for $17 a share and is counting the profit. All the market is concerned with is the clearing price – cost basis and the mode of financing (margin?) are irrelevant. I know the market is much more efficient (or maybe not that much more efficient if you believe the Goldman Sachs conspiracy theories) with thousands of transactions clearing each day on the same “Item” than real estate, but the concept is the same – market price is market price.

  53. 53
    DrShort says:

    RE: Mariner22 @ 52

    In the stock market, you’d get a margin call long before you ever were “underwater” on a stock. If you don’t come up with the cash, the broker will force sell the stock.

  54. 54
    Kary L. Krismer says:

    By Kary L. Krismer @ 30:

    – They aren’t mutually exclusive at all, but there should only be one property in each category at any one time. I’m giving a snapshot, which is why I said the numbers aren’t that useful and you’d need to track the properties individually. For example, a property could go pending, then back active, then canceled, all since 8/1/09, but in the numbers I gave they would only be counted as whatever they were an hour or so ago.

    I realized after I left I should have said one listing, not one property. A property could show up twice in my numbers above if it was relisted.

  55. 55
    Kary L. Krismer says:

    By AMS @ 33:

    RE: Kary L. Krismer @ 30 – Now we have a difference between what The Tim claims,

    By The Tim @ 22:

    RE: AMS @ 19 – That’s not how “pending sales” are counted. The number of “pending sales” reported by the NWMLS at the end of the month is the number of listings that changed from “active” to “pending” in that month only, not the cumulative number of listings in that state as of the last day of the month.

    And your claim:

    “they would only be counted as whatever they were an hour or so ago. ”

    gah.

    Two different things. Tim’s talking about the official NWMLS numbers at the end of each month, and I’m talking about the numbers I posted above.

  56. 56
    Kary L. Krismer says:

    By Jillayne @ 40:

    Hi Kary,

    The banks can’t be forced by government to process short sales faster. The politicians can make noise but unless government is running the banks, the banks are going to do what they need to do to stay alive another quarter and collect their paychecks.nks will hire and train enough people to process short sale (or loan mod, or foreclosures) faster. Loan servicing use to be a profit center, now it’s bleeding red big time. . . .

    Instead of looking outward at government, banks, and the NMLS I say let’s look inward at the Realtors themselves and how the complaining industry can transform to adapt to this new short sale world.

    Government can force banks to do things by changing their remedies.

    As to agents, I’ve been critical of what they do too. The problem is, even if the agent does everything right, the process is still messed up, and it’s messed up because of the banks.

  57. 57
    Kary L. Krismer says:

    By Jillayne @ 41:

    Dues come from members and then we would want to ask the question: Would it benefit the members to break out short sales from the pending numbers? If this would benefit the members and the members want it, then they will do it.

    Well right now NAR is trying to make something of the high pendings.

    But as to actual things that would be positive, without short sales and REOs the median prices would be higher.

  58. 58
    Kary L. Krismer says:

    RE: Sniglet @ 44 – I have seen no indication at all of deals falling through in increasing numbers due to financing or inspections. Most buyers are pre-approved to some extent, and the standards have been reasonably stable. A mortgage broker might have a better indication, but to some extent that could be self-caused. We’re always leery when the buyer picks the mortgage company. Most the sales that are delayed due to financing are the result of a poor mortgage person.

  59. 59

    RE: Kary L. Krismer @ 16

    Hi Kary:

    If the short sale contract includes owing money on a theoretical “upside down loan principle”, then the banks actually have two buyers making monthly payments and the interest income price paid is the sum of both. Theoretically, Kary, as it depends on what’s in the short sale contract for money owed by the short seller after sale. Hence, it artificially inflates the price of the home the banks got.

    Now, does anyone know what the Hades is the credit rating impact difference [if any] of short sale versus simple default?

  60. 60
    The Tim says:

    I just had a thought that it might be interesting to look at the same data that is charted in the post for previous years. So here you go:

    Prior to the bust the largest difference was 14%. This year the difference is nearly three times that.

  61. 61
    Ryan says:

    RE: Sniglet @ 44

    Snigs….why is your sister a deadbeat?

  62. 62
    jasonwarren says:

    Most of the comments so far have been about the macro picture. Here’s an anecdotal view of a specific (non) transaction.

    We tracked a SFH for sale in Snoqualmie Ridge starting early this year as the price was dropped bit by bit over two months. We did a walk through with the seller’s agent after the third price drop, which put it into ‘short’ territory. The agent said the seller had requested *and received* an agreement from ‘the bank’ to sell the property short.

    After the walk through we weren’t super impressed with the home, and decided to wait to make an offer. We got a call from the seller’s agent about a week later asking if we were still interested, and she disclosed that the home was financed with two loans (80/20), and that two ‘banks’ were involved. This sounded odd, but I suspect both loans might have been originated by the same bank and then packaged separately and resold as CDOs, and that perhaps ‘the bank’ might not have been able to negotiate for the 20% loan based on the counter-party ownership. She also disclosed that there wasn’t short sale agreement on the smaller of the two outstanding loans. We weren’t going to make an offer, but the seller’s agent left me with the impression that the listing price was, in effect, not a valid listing price.

    Five months later, this home is still unsold, and the for sale sign has gone down and up a few times. MLS shows pending, but I’m not sure what the true status is.

  63. 63
    patient says:

    RE: The Tim @ 60
    Oups…I think the imaginary recovery touted by MSM just got highly visual…

  64. 64
    SpringStreet says:

    RE: deprogram @ 27 – as a renter, I’m concerned: first, I’m obligated to show the unit with a 24-hour notice. As a result, I’m regularly interrupted by realtors and potential buyers – all of whom are surprised when they show up and find that it was misrepresented in the listing. If listing quality was different (and people knew that this was a short sale), I believe my “quality of life”/privacy would improve – i.e. less traction from people not interested in a short sale.

    When I originally rented the property, the unit was not listed for sale until the day after I signed the lease, so this is a large annoyance for me.

    I’m also frankly concerned with the relative lack of interest in the property that the owner may foreclose, which puts me in a tight spot.

  65. 65
    Kary L. Krismer says:

    By softwarengineer @ 59:

    <
    Now, does anyone know what the Hades is the credit rating impact difference [if any] of short sale versus simple default?

    I think Ken Harney did a piece on that maybe three months ago from the aspect of getting a new Freddie or Fannie loan. As I recall, the foreclosure added about 2-3 years. Rhonda or another mortgage person could probably answer that better.

  66. 66
    Kary L. Krismer says:

    RE: SpringStreet @ 64 – Note that you may now have greater rights under both state and federal law if there is a foreclosure. Both the state and federal are different, and I haven’t memorized either, but where before you had to be out in about 20 days after the foreclosure, now you have 2-3 months under state law, and 6 months under federal in most instances. It’s a bit of a mess because I’m not sure anyone has figured out how state and federal law interact.

  67. 67
    David Losh says:

    This thread shows exactly why short sales should be taken out of the NWMLS system.

    Real Estate agents have absolutely no experience or ability to enter into a transaction that has so much liability associated with it. Short sales should be done by attorneys and accountants. It’s number with contract language.

    The very idea that a Real Estate agent can take a few clock hour courses and enter the arena of high stakes negotiation is very short sighted.

    Banks should be forced to stick with the legal recourse they fought so hard for, which is quick foreclosure. A short sale needs to be for the investors benefit. The seller is walking away from a debt obligation; to do that they need to provide a reason. I don’t want to pay isn’t a reason.

    Look at it this way: the bank generated the loan and sold it to an investor. Two years later the borrower doesn’t pay and the property can not sell for the value of the Note. There is risk to an investor, but for the number of shorts and foreclosures it looks like the bank made some really bad errors. Not only that but the investor losses have caused a global credit crisis. People lost jobs, income, and equity. The problem continues to grow.

  68. 68
    Jillayne says:

    software engineer,

    I got you covered. Find comment number 32.

  69. 69
    Jillayne says:

    Hi David,

    I believe there are plenty of agents who are well trained and very experienced who have not just taken one class but many and who have successfully listed and closed many short sales. Yes there is higher liability for the agent and consequences for the seller. An experienced SS agent along with their own direct legal counsel (and counsel from a tax attorney if needed) is adequate in my opinion.

  70. 70
    AMS says:

    RE: The Tim @ 60

    As the number of closed sales approaches zero, we should expect the percentage gap to increase. It may have nothing to do with short sales, but other failures.

  71. 71
    David Losh says:

    RE: Jillayne @ 68

    Sorry,

    I know you make your living giving these classes, but many people are being hurt in the process of these short sales. The agents may be getting a commission at the expense of the buyer, seller, and stock holders. There are no “deals’ there. There is only a growing problem of more debt instruments on diminishing values.

    It’s a no brainer. Short sales are a step up from the full foreclosure auction price and those auction prices are at best questionable. It’s all numbers.

    So just because some agent closes a transaction to get a commission doesn’t mean it’s a good thing for anybody other than the agent, and then maybe not.

    It’s the same as all the agents who learned about exotic/toxic financing and closed deals. Getting paid doesn’t make it good.

  72. 72
    Unknown Agent says:

    As if only by que, NWMLS just today release a rule clarification on the internal website for agents. In it, they specifically call out that you cannot list a property the seller doesn’t have the unconditional right to sell. There is still an exception for short sales, but that must be listed by checking the box. This may be in preparation for fining people more aggressively for short sales that are not marked as short sales.. it sure looks like it. Rule change is effective Oct. 2, 2009… but existing listings are grandfathered in until they expire.

  73. 73
    AMS says:

    RE: David Losh @ 71

    What you are suggesting is like blaming the hospital workers for disease! The health care professional simply cleans up the mess that comes in.

    Similarly, the market value of the home has already changed. The agents that do short sales only clean the mess that is already there. Don’t blame the agents for something that happened in the past.

    This reminds me of a gal I know who said, “But I owe $$$$ on my car, so it should be worth at least that much.”

    All of that said, one man’s scrap is another man’s raw materials.

  74. 74
    Jillayne says:

    “Hi David,

    “The agents may be getting a commission at the expense of the buyer, seller”

    Experienced short sale listing Agents work 4 times as hard as a regular transaction with increased liability.

    I believe the two of us agree that INexperienced agents who take short sale listings are doing a dis-service for the sellers AND buyers.

    Remember, I am advocating that an agent always makes sure the seller has direct, local legal counsel.

    Maybe a law firm that also has a real estate license is the answer to your suggestions. I think I know a few of those Joe Hochman in Issaquah and also I believe Craig Blackmon has this ability, too. i will check with him.

  75. 75
    David Losh says:

    RE: AMS @ 73

    Not even close.

    There are so many examples of discrepencies in agreement to closing documents it would take pages to list. Second there are few realeases of liability on seconds, or firsts for that matter. Third is that it is a no brainer that values will fall further than the short sale price as foreclosures and REOs continue to filter into the market place.

    Dealing with the bank is stacked in the bank’s favor. These great “deals” will hurt some body and probably all of us. Once the game playing stops and the fun is all about real dollars, and who will pay, things will look different.

  76. 76
    Jillayne says:

    Tim,

    To answer your question directly, I do not believe the NMLS should ban short sales. Instead, I believe they should ENFORCE their rules regarding short sales and it sounds like they will be doing that. Also, NWMLS should also start providing official short sale stats. If they have the stats, why not just show their members the percentage of pending sales that are short sales?

    It just doesn’t seem like it would be that much work for them to do.

    Another part of the problem with short sales is agent turnover. With a steady percentage of agents arriving and leaving the industry every few years, and then many part time agents by necessity, we have a continuous problem with educating the new and licensed-but-inexperienced year after year.

  77. 77
    AMS says:

    RE: David Losh @ 75

    The simple solution is for the seller/owner/whatever to pay the mortgage off and then sell. If this is done, then the issue of the short sale goes away. I am sure you will be quick to point out that the problem is far beyond the means of the seller/owner/whatever.

    The market value has already changed. Don’t blame those who are cleaning up the mess of the person who is trying to sell.

    Oh, and I should address this:

    “Dealing with the bank is stacked in the bank’s favor.”

    It’s simple: Pay the mortgage off! Otherwise, shouldn’t it be stacked in the bank’s favor?

  78. 78
    David Losh says:

    RE: Jillayne @ 74

    I’m going to address this now because it’s a poison seed.

    An attorney can not fix a short sale. An attorney can negotiate, any body can negotiate, it depends on the end result.

    I have done a lot of short sales and talked with other people who have done lots of short sales. They have always been a part of the real estate business, they are nothing new.

    Today the banks are in a unique position of cherry picking deals they want to make.

    What we all want from the short sale is a release of the defeciency. Just because an agent is working on a deal doen’t mean it’s going to get the release and clear the seller. The buyer is screwed no matter what. They are paying too much.

    Look at the reality. Negotiators have been saying for over a year they are swamped. Nothing has changed in over a year. It’s all the same BS. As long as the banks are selling for more than they could ever hope for at auction they will continue to sell, if the investor agrees.

  79. 79
    David Losh says:

    RE: AMS @ 77

    Absolutely the seller should pay down the principle balance, absolutely. If they do not, the legal recourse, the contract, the Note, has is for foreclosure. In my opinion if you truly can not pay the Note for a variety of compassionate reasons then it is in the sellers best interest to allow the property to foreclose.

    I have done good short sales for a variety of reasons. In most cases the bank has accepted the short as payment in full. Like I have said there needs to be a reason to sell short. Even with a very good reason the lender or investor will lie, cheat, and pursue by legal action the seller for the remaining balance.

    The short sale is no panacea and we have yet to know what will happen to the seller.

  80. 80
    AMS says:

    RE: David Losh @ 79

    Oh, the Deficiency Judgment…

    This is a far more complex issue. In automobiles there seems to be an acceptance of the deficiency judgment, but in housing it is not the same in all states. In some states it depends on the type of “foreclosure,” 1. Simple Trustee Sale, or 2. Court Action. I am not sure about Washington…

    I’d suggest that the deficiency should be clearly covered in the deal. If small enough, possibly the seller is willing/able to pay it off in “small monthly payments.” I am sure there are cases where it makes sense for the seller to just pay. On the other hand, there are situations where it is clearly in the seller’s best interest to avoid the deficiency issue, and if a foreclosure will avoid it, then that is what should be done, rather than line the pockets of selling agents.

    On a strictly financial basis, I would look at the discounted present value of the future damage, and benefits, of a foreclosure versus other options, and then minimize the damage.

  81. 81
    Kary L. Krismer says:

    By David Losh @ 78:

    RE: Jillayne @ 74

    I’m going to address this now because it’s a poison seed.

    An attorney can not fix a short sale. An attorney can negotiate, any body can negotiate, it depends on the end result.

    Well first, there are a lot more considerations than just the deficiency. Taxes come to mind. I think an attorney is in a much better position to be able to understand and research such issues.

    Second, I suspect an agent negotiating the terms of a short sale with a bank very well could be unauthorized practice of law. You’re not just negotiating the terms of a purchase contract yet to be entered into, you’re negotiating the resolution of an existing contract. I doubt there’s any case law on that precise issue in Washington, but I certainly wouldn’t envy the agent that becomes the test case. Keep in mind that this isn’t as extreme as what they came up with under the distressed property law, where just contacting the bank would be a consumer protection act violation.

    Finally, for quite some time I’ve felt that an agent doing short sales should use an attorney based escrow service. I’ve done that myself even though I’m still authorized to practice law. That was particularly important prior to the amendment of the distressed property law, but I think there are still good reasons to do that.

  82. 82
    David Losh says:

    RE: Kary L. Krismer @ 81

    I have used John Wagner Escrow exclusively when allowed to. John is an attorney with a practice of Real Estate Law. However I have also been forced to use other attorney escrow companies who were a problem. Many attorneys are overly impressed with the title of attorney. I like John because he is quick, decisive, and very much in touch with the workings of having a Real Estate. I’ll also say that problems have slipped by his office that were costly. Each transaction is different.

    In my opinion short sales should be done in an outside agency arrangement with an attorney and accountant. What bothers me the most is that closing documents can change radically from the Purchase and Sale Agreement. I doubt very much that the intent of the short sale is ever really achieved now days. I don’t believe there is any true meeting of the minds in any of this.

    Buyers are being lead to believe they are getting a good deal by paying 20% of market value or face value. Sellers are being lead to believe they are getting out from under some burden. I don’t know and would never be able to say what will happen in the documents any one is signing at escrow so feel these are misrepresentations.

    An attorney would have to, on a case by case basis, go over all documents associated with the transaction and get an agreement in place at escrow. I know as sure as I’m sitting here that after eight months of hoping the deal goes together that no one is going to go over all of the documents. Banks are playing this take it or leave it game of rushing escrow. Only God knows what’s going on there.

    Let me say that these past couple of years have been a low point for the Real Estate industry. What has gone on this year has to be the best example of why we need to adjust this sales commission mentality. People are being sold a bill of goods today when the focus should be on protecting people from the mortgage industry.

    There is no other time in history when robust Real Estate sales have driven the stock market as much as they do today. We are all being victimize by mortgage and Real Estate sales gimmicks that will have to be reconciled. People paying too much or incurring millions and billions of dollars in debt just because the “market” is doing something is insane.

    Short sales are today’s “buy now or be priced out forever” sales gimmick.

  83. 83
    Abby Cain says:

    We made an offer on a SS property in March. The bank and everyone else approved it. Fannie Mae, the bank, and the seller accepted our offer. NOW we are waiting on the mortgage insurance company…they are the WORST! They won’t even let the listing agent know if they have the package in their hands. THEY are the problem with our offer even going through. Have you ever heard of this?

  84. 84
    Kary L. Krismer says:

    Short sales are for bargain hunters that don’t necessarily care when they close, and perhaps don’t even care how many properties they buy, if any. For it to work for your average first time home-buyer, they would either need to live at home still, have a month-to-month rental, or perhaps have a lease with a relatively cheap buyout provision.

    But the thing is, they aren’t really bargains. You could probably get as good of a deal, if not better, buying an REO. There after a time the bank eventually knows that it’s BPO is off the mark on the high side, and won’t be trying to claim that’s what they need to recover. That doesn’t happen with short sales. And in some instances, you could get a better deal just buying an ordinary listing.

  85. 85
    David Losh says:

    There are a few agents that work with banks. It’s a complicated set of relationships that no one wants to explain. Banks need to clear files. Now that the auction process has stalled banks are trying to make more side deals to deplete a back log.

    Banks have to show cause to investors. Some investors hold multiple Notes. The investor is the one who decides on their strategy.

    This is the ultimate of back room dealings that you will never see. You are dealing with people who invest money for a living. They deal in millions and billions of dollars. You are far removed from the NWMLS or Real Estate agent system. .

    So your buyer may care and they may get a discount. Chnaces are they are paying the highest price that a bank could ever get for the investor. The bank knows who will be brining them more business and that’s the investor. At the same time I don’t think that the bank will forget the seller in this process.

    I have no way of seeing all laws and documents associated with each file and neither does any one else. You just don’t know what will happen after the bank has strung you along for months.

  86. 86
    AMS says:

    RE: David Losh @ 85

    I don’t think you are complaining about the selling agents, but rather the larger context that short sales need to be placed. Starting with the owner/debtor, you shift to public policy arguments. This is really tough, as on the one had you seek to maximize the benefit to the current owner, yet on the other hand you seek to maximize the good to all players. It’s almost like you want to maximize the public good while the owners give up nothing.

    There is no simple solution to large reductions in market value with high levels of existing debt, and that is what underpins the situation. If the market value had continued to go up by 15 to 20% per year, short sales would not be much of an issue.

  87. 87
    deprogram says:

    By The Tim @ 42:

    I would also like to point out that while some of the comments here are getting into the stats question of separating the short sale pendings from the “normal” pendings, that was not intended to be the thrust of my post. I was asking the question of whether short sales should be banned not so our stats can be cleaner and more useful, but just because of all the time people are wasting dealing with non-responsive banks. It makes the whole market terribly inefficient, IMO.

    Well, I banned myself from even considering them. I hate banks enough as it is. Yeah, it’d be nice if I could actually get clean results from my Redfin searches, but even that doesn’t work.

    Banning short sales outright would be almost impossible from a legal standpoint, even IF in some hypothetical world you could get banks to agree to it. You’re literally talking about changes to contract law.

    Getting the NWMLS to ban listings? Well, good luck – it’d be nice for the reasons you state. I’d settle for simply having short sales properly listed as such.

    Meh.

  88. 88
    deprogram says:

    RE: Sniglet @ 44 – Right on the money.

    Banks don’t want to short OR foreclose right now. I even see them taking foreclosed properties off the market and let them sit vacant rather than accepting offers right around their asking price.

    Great way to maintain a property’s value: let it sit unoccupied and rot. It’s messed up.

  89. 89
    Kary L. Krismer says:

    RE: deprogram @ 88 – As I mentioned, I’ve seen just the opposite up north. Not only clean, but new carpet and paint. They’re doing the things normal sellers would do if they had the funds, which they should have been doing all along, because they have the funds.

  90. 90
    deprogram says:

    By SpringStreet @ 64:

    RE: deprogram @ 27 – as a renter, I’m concerned: first, I’m obligated to show the unit with a 24-hour notice. As a result, I’m regularly interrupted by realtors and potential buyers – all of whom are surprised when they show up and find that it was misrepresented in the listing. If listing quality was different (and people knew that this was a short sale), I believe my “quality of life”/privacy would improve – i.e. less traction from people not interested in a short sale.

    When I originally rented the property, the unit was not listed for sale until the day after I signed the lease, so this is a large annoyance for me.

    I’m also frankly concerned with the relative lack of interest in the property that the owner may foreclose, which puts me in a tight spot.

    Hah! We’re in the same spot, except our property isn’t actually listed. The landlords want to sell, but they are so underwater by now, and I’m paying their mortgage in full, that they have decided to leave us alone… I think.

    http://apps.leg.wa.gov/RCW/default.aspx?cite=59.18.150

    Read the -whole- thing. 24 hours is a legal minimum of notice regardless of what contract you may have signed – but they can’t abuse the privilege.

    You have legal recourse if they abuse this privilege, and I would not hesitate to avail my self of such.

    Yes, you can make them pay.

    (5) The landlord shall not abuse the right of access or use it to harass the tenant. Except in the case of emergency or if it is impracticable to do so, the landlord shall give the tenant at least two days’ notice of his or her intent to enter and shall enter only at reasonable times. The tenant shall not unreasonably withhold consent to the landlord to enter the dwelling unit at a specified time where the landlord has given at least one day’s notice of intent to enter to exhibit the dwelling unit to prospective or actual purchasers or tenants. A landlord shall not unreasonably interfere with a tenant’s enjoyment of the rented dwelling unit by excessively exhibiting the dwelling unit.

    Of course, IANAL, etc.

  91. 91
    deprogram says:

    By Kary L. Krismer @ 89:

    RE: deprogram @ 88 – As I mentioned, I’ve seen just the opposite up north. Not only clean, but new carpet and paint. They’re doing the things normal sellers would do if they had the funds, which they should have been doing all along, because they have the funds.

    Where is ‘up north’? In the upper parts of the market? Some geographical location?

    I couldn’t find the post you’re referring to.

  92. 92
    Kary L. Krismer says:

    RE: deprogram @ 91 – Snohomish/Everett.

  93. 93
    David Losh says:

    RE: Kary L. Krismer @ 89

    The public knows very little about the short sale process and what’s going on.

    There is a sucker born every minute and they are buying houses today rather than waiting.

    Banks are professionals. There are professionals who work in distress properties. The bank is more than willing to make a side deal with any one who can move inventory.

    Investment groups are taking on shorts and preforeclosures. They take on the risk of the property with the hope of reselling for a profit.

  94. 94
    deprogram says:

    RE: Kary L. Krismer @ 92 – Huh.

    I think we may be looking at different segments of the market. I’m really looking for a fixer… Unfortunately fixer properties mostly disappeared during the remuddle/flip decade, and I’m not paying for shiny appliances that won’t even hold a magnet.

    So… mostly roaches left. Shame really. And I HATE carpet. Mankind’s worst invention ever. Slightly worse than vinyl siding. Yes, I’m exaggerating – but I’m still ripping every bit of carpet out of whatever place I eventually get.

  95. 95
    Kary L. Krismer says:

    What I was saying in the other thread, or somewhere here, was that the bank owned properties I saw up in Snohomish this week were actually in pretty good condition. It was quite the contrast to what I’ve seen down in the Kent/Renton area, where often they aren’t even clean. I’d also mentioned that since the wife had found the properties, I wasn’t sure of their ownership, but that at least some of them were Freddie or Fannie, so perhaps that’s the difference. But I’d be surprised if all the bank owned properties we saw were F&F, because we looked at quite a few.

  96. 96
    deprogram says:

    By David Losh @ 93:

    RE: Kary L. Krismer @ 89

    The public knows very little about the short sale process and what’s going on.

    There is a sucker born every minute and they are buying houses today rather than waiting.

    So true.

    In fact, the public know very little about anything. No, really! Most people are very comfortable in their little sphere of understanding, and pushing the boundaries of that is terrifying.

    I think at times we all labor under the delusion that we think we know how the world works. The more I learn of the world, and the more I explore, the more I find that there is to know. I am smart enough to realize I don’t understand everything, and it’s a physical impossibility to know everything – but that’s not going to stop me from learning as much as I possibly can.

    Once again: I cannot compete with the stupidity (and spending power) of the masses. So I’m not even going to try.

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