The last year or so I have started getting calls and e-mails about short sales and how they are driving many people involved in them crazy.
Buyers who are seeking a great short-sale price often report being seriously frustrated. They ask: does it always takes this long to make a deal?
Real estate agents say they make offers and two or three months will go by without a response from the bank that has the final say. (Who knows, maybe they are really lousy offers). Some agents say they will not even consider short sales for their buyers.
On the seller side, people complain they are being forced into foreclosure - while having a buyer and waiting for a response from the bank that does not come in time.
And yet for all these hassles there are still thousands of houses on the market trying to be short sales. Maybe this is because people don't know they are so difficult.
What is a short sale exactly? This is where the bank agrees to accept less than owed to avoid the even higher costs of foreclosing and reselling in a declining market. Here is an example: A buyer agrees to pay $350,000 for your house. But you owe the bank $390,000. Under the best scenario the bank says yes to the offer, takes the loss and you both move on.
This sounds good, but truth is it is not happening that often. That much is clear from
state data that is now tracking lender moves to keep
people in homes instead of foreclosing on them. (See line 10).
Ten big lenders that service about half of the subprime loans in California reported they did only 872 short sales in January. (line 10). That compared to 5,630 loan modifications - everything from freezing interest rates to reducing the amount of the principal.
The data gathered by the Department of Corporations say short sales totaled just 5.4 percent of lifeline solutions offered to thousands of struggling California borrowers in January. A year earlier short sales were only 2.5 percent of the alternatives.
So if you are wondering why short sales are such a frustrating way to get a great deal, those numbers should tell you plenty. Lenders obviously see them as a lower priority in their workout efforts and just are not doing very many.
The word now, especially for buyers, is wait until the house gets repossessed by the bank. Then everything gets easier - and usually cheaper.