Sunday, April 06, 2008

South Bay-Beach Cities Real Estate: Short Sales Suck

I had dinner with two very savvy real estate agents last night. These agents have been in the business for a long time and know their way around a short sale. They have listed and sold short sale properties. Neither of them will deal with short sales again.

I sympathize with them... as I don't want to do them either. Banks have no idea how to process these types of sales. Nor do they have the staff to deal with them even if they knew what they were doing. It's a joke. I did a number of short sales in the 90's so this is familiar territory. Last month I closed a short sale after an arduous escrow that saw my buyers ready to bail. The lender would only communicate via fax and refused to take calls even from escrow.

Lenders are just plain stupid at this point. They will not talk to a listing agent who might be able to expedite the situation. They don't use e-mail. Many will only communicate by fax. They change personnel and phone numbers and don't give out new information. They will approve a sale and then change their mind two weeks later. They will try to stiff an agent on commission after they have approved the fee. I know of agents who wound up receiving no money after working for 2-6 months on one of these sales. They believe we should work for free because they made poor choices. Then they wonder why good agents will not work these types of sales. They have no clue about local real estate markets. Yesterday one of the agents had a bank suddenly decide to go to sale rather then approve the short sale because they "knew someone would buy the property at auction for more then the short sale".... talk about out of touch.

I have little patience with their behavior. They have learned nothing. I recently had a lender approve a drive by appraisal. I was stunned. Granted the buyers are great with a large down payment, excellent credit and are going for a fixed rate loan.. but still a drive by appraisal.

The banking community is in trouble and are begging for big bailouts from the government. They expect the taxpayers to pay for their mistakes. Yet they do nothing to resolve their problems. They have learned nothing in the last 18 months. They are ignorant and arrogant in their ignorance. Most act as if the market is moving upward not downward. They cry poor me to the congressional banking committees while they act like spoiled children rather then as adults.

The first step might be to get in touch with experienced local agents and find out what is really happening in these markets. The second step would be to take a realistic approach to their past errors and try to mitigate their losses through smart choices. It's just a thought......



Vicki Lloyd said...

You said: "They are ignorant and arrogant in their ignorance."

I agree, but I had previously been thinking that their full in-baskets were giving them job security, but that makes too much sense!

Boycott short sales!

Kaye Thomas said...

You are too funny.. Short sales could be a real plus for banks if they would just get their act together.. The are far more cost effective then foreclosure..

MBWatcher said...

Putting aside the hassles (can you?), do you see an argument that out-of-touch banks could be brought to take less than the market might bear by an enterprising and patient buyer?

Just curious if this part of the crisis has a silver lining. I have friends in a different city who are low-balling the bank on a shortie.

Kaye Thomas said...

MB Watcher,
Actually the problem is exactly the opposite.. these banks believe the property is worth more then it is... which is why they refuse to complete the short sale in most cases.

You can show them comps for recently pending and sold property and show them what's on the market and they still believe the price should be higher.

The out of area lenders are usually also out of touch with the local markets. If they would just refuse the sale upfront it wouldn't be so bad. Sadly many of these lenders refuse the sale at the last minute and owners find themselves in foreclosure instead of closing escrow as they were led to believe would happen.

The bad decisions made by lenders just make the future problems worse. Once a property has been foreclosed it can take 6-9 months for the property to get to market. The bank has lost income and often the property price will have dropped even further leaving them with a much larger loss then if they had accepted the short sale.

Most lenders finally figured it out in the 90's and were doing everything they could to complete a short sale rather then go into foreclosure.. The current crop of lenders have not yet realized that short sales are a better way to go. But then they also thought people with lousy credit were perfect candidates to buy homes with loans that would have the payments double in 2 years...

Gena Riede said...

My sentiments exactly. In fact, I too was amazed not just with a short sale but with two Bank of America loans, one of which had no downpayment and yet they ordered a drive-by. Amazing!

I couldn't have said any of this any better!

Kaye Thomas said...

As the Chinese say may you live in interesting times.. and we do..