Photo courtesy of Around Hawaii
The California Association of REALTORS® has put full page ads in numerous papers throughout California regarding the frustration of dealing with banks in trying to do short sales with them. A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency
Having had numerous short sales fall through, I fully understand the frustration of buyers and sellers in trying to work with banks in doing short sales. I don’t know what their problem is. They seem to be extremely great at finding ways to tack on fees for every dealing you do with them, but complete disregard for completing what should be a smooth sale of real estate property of which they have an interest in.
I have two short sales going right now that have been in the works since November of last year. One of the banks, after five months has finally reviewed all the paper work on one of the short sales, (a simple offer to purchase property) and assigned a negotiator to deal with the purchase contract. This by no means says that the bank will accept the offer that was made. I’ve had banks come back after an offer was made and demand $30,000 more than the property was worth. This resulted in the property not being sold in a short sale, foreclosed and the banks losing thousands of dollars because they refused to go along with the short sale.
Here’s a press release from C.A.R. further explaining the frustrations of short sales:
Banks drag feet on short sales, survey finds
The CALIFORNIA ASSOCIATION OF REALTOR® (C.A.R.) published its findings of a survey this week, which show that tedious lender requirements and poor communication hamper short sales.
- Fewer than three of five short sales close in California, illustrating the complexity and difficulty of navigating lenders’ and servicers’ short sale procedures, according to C.A.R.’s survey, which gauged REALTORS®’ experience in working with short sale transactions – transactions in which the lender or lenders agree to accept less than the mortgage amount owed by the current homeowner.
- Although not every homeowner or mortgage is eligible for a short sale, those who are able to finalize a short sale avoid a foreclosure on their credit record and can move on with their lives.
- Banks are taking much longer to respond to short sale offers than those specified in government guidelines for banks. Nearly two-thirds of survey respondents said banks took longer than 60 days to respond to short sale offers. Often, this results in buyers walking away from the transaction.
- “Increasing the number of successful short sale transactions is one important way we can help California families avoid foreclosure and move our economy closer to recovery,” said C.A.R. President Beth L. Peerce.
- C.A.R. is asking government agencies, such as the U.S. Dept. of the Treasury, to force banks to complete all short sales following HAFA guidelines and to comply with the program’s time frames.