Kenneth R. Harney reported in a Realty Times article that ” Fannie Mae, the single biggest player in the American mortgage market, plans to crank up the pace of short sales on properties in its bulging portfolio. Fannie intends to “streamline” procedures to enable pre-foreclosure sales to speed through what is currently an extended, and often complicated, process. Fannie says it plans to “pre-approve” certain short sales–a major change from current practices–and wants to provide higher commission incentives to realty agents who can connect sellers with qualified buyers.”
Gang this is a huge step in the right direction. Currently and for MONTHS prior, short sales were a major pain in the neck and often times did not pan out. Here’s what would happen:
The home owner who was behind in his or her payments would hire a real estate agent to sell their home. The agent would have the horrible responsibility of telling the homeowner that the home was not worth even as much as was owed to the bank. So the homeowner would either have to write a check for the difference between the amount owed and the lower sales price OR the lender would have to agree to take less than the full amount owed. This is called a short sale meaning that the sale price is short of the amount owed on the home or condo.
If the owner did not have the money to pay the difference then often times a short sale was the only option. To do this, the agent, on behalf of the financially struggling home owner, has to approach the lender to see if the lender would even be amenable to a short sale. After a ton of the “run around” and an inordinate amount of time and frustration, the agent might get the lenders preliminary approval (meaning it can change its mind if it wants to later). The agent then lists the home for sale, markets it, shows it, hopefully finds a buyer, negotiates a contract and gets acceptance between buyer and seller. Then the agent has to submit the contract to the lender for final approval before the deal can close.
Well, the department at the bank that handles this (the Loss Mitigation Department) is often times so back-logged that they never respond to the short sale contract. I mean they literally never approve the deal. The buyer ultimately walks away, and the owner and the agent are left sitting there, really ticked off, and what’s worse, the property ultimately goes into foreclosure instead have being sold to the buyer above.
Insane isn’t it!!!
Now in defense of the lenders neither they nor anyone knew just how bad things were going to get and the banks were ill prepared for this downturn. Afterall, prior to the last couple years, very very few homes ever went into foreclosure. The banks didn’t really have foreclosure departments or if they did they were very small. I would think all the talented bankers wanted to be in the lending side of the equation where all the business was being done and NOT stuck in the boring and slow foreclosure department. So now, every bank needs talented and experienced foreclosure (loss mitigation) people and few exist. So, deals that should get done, don’t get done because they are buried under thousands of other deals.
So, the short sale doesn’t get approved, the property goes to foreclosure and auction (which costs the bank a ton more money) and nobody buys the property at the auction so it goes back to the bank. [Why do so few homes and condominiums sell at the auction? Becuase unlike the scenario above where the realtor found someone who probably wants to live in the home and has emotional reasons to buy it, the guys at the auction are stone cold businessmen looking for a steal. Well, the banks don't yet get that...or if they do they're too slammed to do anything about it so the auction price is set higher than the auction attendees are willing to pay. Heck, what's sick is we have seen properties that had been marketed as a short sale with a bonafide buyer get ignored or rejected or passed up, and then go to auction for a price LOWER than the short sale amount and still not get purchased!].
After the property gets ignored at the auction and goes back to the bank, the bank then has to spend even more money, time, energy, and personnel to sell the property. Believe me when I tell you, in a depreciating market, the bank is losing a ton of dough by not selling these before foreclosure as a short sale.
So, if Harney is right and Fannie Mae is making a commitment to streamline the process and make it more efficient then this is fantastic news for everyone. According to Harney, “Investors like Freddie and Fannie want to speed up the pace of short sales because — to put it bluntly — it saves them a ton of money. They avoid the crushing costs of foreclosures. Plus, they generally get a much higher payoff percentage of what they’re owed.”
Right now, its estimated that 20% of all sales in the country are preforeclosure sales (e.g. short sales or something similar). We expect this number to go up. If the banks make the process more efficient then more sales will occur and we will have a chance to sell our way out of this economic
mess. But gang, when we do get out of this mess, be conservative with your money; treat your home like something precisous and pay off the mortgage rather than leverage it up to the hilt. I know I will.
Finally, if you need help with the sale of a property, ANY property (we don’t just do high rise and loft condos) then give us a call. We can help you get through these tough times (just don’t forget us during the good times 
To see a sampling of the short sales and foreclosures out there visit www.WeKnowUrban.com/Short-Sales_Foreclosures_Distressed/ .
