Sacramento Real Estate Views

The Foreclosure Crisis Is Ending

Lenders Now Favor Short Sales

The housing crisis in our region and the rest of the nation is far from over but the market has been shifting from foreclosures to short sales over the last 8 months.  Lenders are now favoring short sales vs. foreclosure as an option for struggling homeowners.

Approval times have shortened and the banks are sending out notices to homeowners letting them know, if they are either in default or behind, that if they would like to sell short the bank will help facilitate that option.

HAMP Fails

The loan modification process has been a complete failure.  Lenders refuse to lower principal loan amounts in favor of modifying interest rates and terms.  The re-default numbers in this program are somewhere in the 60% to 75% range.  Anyone paying attention in the industry knows this to be the case.

Allowing the homeowners to sell short is the option that makes the investor back the most amount of money and helps the homeowner avoid the credit degradation of foreclosure. The HAFA program is designed with this in mind.

Selling short is the best option if the lender will not reduce the principal loan amount.  Lowering principal loan amounts is universally accepted as the only viable solution to keeping people in their homes.

( Incidentally, Bank of America has recently begun a program to reduce principal loan amounts but has only, to date, helped 45,000 or so of their mortgages in default )

It’s In The Numbers

This trend is evidenced by the number of homes for sale in the 3 county area of Placer, Sacramento and El Dorado counties.  As the graph shows, bank owned homes/foreclosed homes now occupy, as of this writing, only 16.9% of the available homes for sale, available short sale homes for sale occupy 29.6% of the market and all others occupying 54.5% of the available homes for sale.

If the banks were still foreclosing, trashing out homes and putting them on the market, we would see that the number of bank owned homes available for sale would be higher than 16.9%.  The percentage of bank owned homes on the market has steadily declined for the last year.

This information is directly from Metrolist Services, Inc., the listing service for Realtors in the region.

Selling Short Could Be The Best Option

If you need to sell your home and you owe more than your home is worth, short sale is the best option.  I’ve heard that short sales are being approved even if the seller barely has a legitimate reason to do so.  With so many mortgages underwater, I guess lenders are beginning to figure out that the stigma of walking away is all but gone and will work with seller’s to get them out of their homes.

This doesn’t come without consequences of course but with the prospect that appreciation in this region has “left the building”, it seems to make smart financial sense to move on, rent and start over when possible.  Click here for an appreciation scenario.

If you’re needing to make this financial decision and would like a confidential meeting to discuss your options with regarding to selling short, please feel free to contact us.  We have a professional negotiation team that handles that short sale process closing a very high percentage of short sales every month.  Fill out the form below and we’ll get back to you as promptly as possible.

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Tags: short sales sacramento rocklin roseville

Is It Available or Not!?

The Term “Active Short Sale Cont.”

There is some confusion in the market today with a relatively new term that relates to the market status of a home called “active short sale cont.”

Short sales are new for our market.  They have only been around in abundance for the last year and a half in this cycle and most buyers, first timers especially, aren’t familiar with the term.  It appears that the home is available because the word “active” is there but this is misleading.

In the process of a short sale, the seller/borrower must produce financial documents showing that there is a legitimate need to sell for less that what is owed on the home.  The lender doesn’t want to take a loss and won’t approve the short sale without good reason to do so.

Currently, this process takes forever due to the volume of short sales happening nationwide. Our economy and value losses in our region have taken their toll and some can no longer afford to stay in their homes.

Waiting On Lender Approval

After the seller/borrower of the home to be sold short has gathered together all of the financial information they need to submit to the lender, the listing agent packages those documents along with the listing agreement and the highest and best offer and sends it to the lender for their approval.

This is when the property goes into the status “active short sale cont.”.

Listing agents tend to submit only one offer to the lender so that the financial package is streamlined and efficient in the hope of getting a speedy approval.

This rarely happens as the volume of files the lender is  receiving requesting a short sale is just more than their loss mitigation departments can handle.

And More Waiting

After the package is submitted, the waiting game begins…and goes on and on and on.

While the short sales process has gotten quicker, in the Rocklin and Roseville real estate markets, the average days on the market for a short sale is 169 days. This is the average amount of time it takes for a short sale to go into “pending” status.

Then add 30 to 45 days in escrow and the average time for a home to be sold short in Rocklin and Roseville since August 1st of 2009 is roughly 209 days!

Sweet!

The days on market time stops when a home goes pending sale.

“Pending” status in a short sale is when the package has been approved by the lender and the offer has been accepted…if the buyer is still around to close!

Often, the original buyer disappears long before the short sale approval ever happens and then the seller/borrower starts over with a new buyer.  The process just takes too long.

With the new buyer, time frames are shortened as the short sale has already been approved and it’s then a matter of submitting a new offer and getting lender approval.

“Buyer disappeared, need offers!” is a common comment in the confidential agent remarks in the MLS.

All in all, and I’ve said this before far too many times, there is nothing short about a short sale.  If you’re in a hurry trying to take advantage of the first time home buyer tax credit..you won’t have enough time to get it closed before the expiration date.

Have questions?  Please feel free to call or email.

Thanks for visiting!

Tags: short sales sacramento rocklin roseville