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Banks Finally Try to Make Short Sales Shorter

This post was written by jd on May 23, 2009
Posted Under: Real Estate

short-sale-sign

There is sometimes nothing more frustrating than a short sale. Banks typically take 90 days to six months, accept other offers if they are a dollar higher in the meantime, therefore never knowing if the home your are trying to buy will become a reality. So the news is that Bank of America and Wells Fargo, say they are making it easier for delinquent borrowers to avoid foreclosure by selling their homes for less than they owe on them.

Their efforts dovetail with a strategy unveiled last week by the Obama administration to promote such short sales.

Demand for short sales has burgeoned because falling home prices have made it impossible for many homeowners to get high enough prices to repay their lenders if they run into financial trouble, such as a job loss.

A short sale has an advantage over foreclosure for the homeowner because it is less embarrassing and does less damage to his or her credit. And for the lender, it is less costly than having to repossess, market and maintain a vacant property. Avoiding a foreclosure means keeping a house occupied which helps preserve a neighborhood.

However, because of the complexity of such transactions — including the need for approval of a sales price by lenders, investors and mortgage insurers — the sales often fall apart. Real estate agents complain that by the time they get an answer from the bank on an offer, the potential buyer has lost interest.

At Bank of America, the nation’s largest mortgage servicer, more than 60 percent of approved short sales do not close, which is why the bank wants to streamline the process, said BofA Senior Vice President David Sunlin by telephone Thursday.

Sunlin, who manages short sales for the bank, said the “bank’s first goal still is to negotiate a mortgage modification that will let a borrower keep his home —during those negotiations the bank can simultaneously obtain the documentation needed to qualify the borrower for a short sale if the modification doesn’t work”

Banks typically do not begin the lengthy process of qualifying a borrower for a short sale until it has received a purchase offer.

To expedite short sales, Bank of America has enlarged and updated staff training and set up a phone line dedicated to short sales that borrowers and their agents can use.

 Sunlin said, ” in 60 to 90 days the bank will roll out a Web program it will use to find and track the short sales of houses with mortgages that it services.  The Web portal also will accept qualifying documentation from clients wishing to do short sales.”

It typically takes 45 to 60 days for the bank to tell a client if a short sale offer can be accepted and up to 90 days if an investor must approve , with the goal for the banks is to shorten this time line.

By doing this, we should see more private sales instead of more sales of bank-owned (houses),” 

Sunlin said short sales will also benefit from an amendment to President Barack Obama’s Making Home Affordable program announced last week that will standardize short sale application and acceptance forms. It also provides monetary incentives to servicers and helps cover relocation expense for homeowners.

David Knight, senior vice president at Wells Fargo Home Mortgage, said in an interview that his bank has been working many months to reduce delays in the short sale process. He said the bank is working closely with borrowers’ agents to increase the likelihood that the listing prices on a short sale will be accepted.

The lending and real estate industries have been on a crash course to learn about short sales since the housing market bust, Knight said. “The big challenge is none of us really understood the process,”

By the way, as of May 22, 2009, in Nevada County, there are 103 active short sales on the market and 55 short sales with contingencies, for a total of 158 short sales.

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Reader Comments

Great news, thanks for sharing this update. The “short sale” process needs to be streamlined so that home inventory can be reduced and the market can start to return to normal.

#1 
Written By Dan Simon - Charleston SC Real Estate on May 24th, 2009 @ 7:15 AM

I hope they’ll streamline the shortsale process soon. I put in an offer to buy a home for shortsale, it’s been 45 days now since the offer had been submitted to BOFA,and they still have not done a BPO yet, I can’t wait forever!

#2 
Written By Anonymous on July 7th, 2009 @ 3:56 PM

You thin 45 days is long I have given my case to a lawyer, the short sale contract was received in Sept. of last year and the loss mitigation dpt. says its still in review.

#3 
Written By Anonymous on July 7th, 2009 @ 6:02 PM

I guess they didn’t roll that plan out in the 60 to 90 days. We submitted an offer in July to Bank of America and it just keeps being moved from person to person. The kicker is you can never speak to the so called person who has the file. We are going on 3 months now with no answer from Bank of America on a great offer.

#4 
Written By Anonymous on October 27th, 2009 @ 11:00 AM

We have been waiting 113 days, (not including weekend, and still no word from Bank of America.

#5 
Written By Anonymous on December 22nd, 2009 @ 11:43 AM

They better accept your short sell offer soon before the prices come down further.

#6 
Written By Anonymous on January 31st, 2010 @ 5:53 PM

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