Posted on February 5, 2009
As my broker will tell you... I can talk. I can talk about almost anything. While he gets on my case about it, there is a positive side to it. I talk to my colleagues daily about what they are seeing in the market. What are the new trends? The hidden gotchas? The daily frustrations? What great houses have they seen lately? What agent made a goofy mistake in entering a listing in the MLS?
Anything.
I also sit on the Windermere Standards of Practice board where we, you guessed it, talk. We talk primarily about how to make ourselves and Windermere better agents and better brokerages. About six to eight months ago the question of short sales, bank owned properties, and foreclosures was almost a non-issue. At that time, very few (if any) of the agents on that board were specifically targeting distressed homes in the business practices.
However, there has been a change in the market and, not surprisingly, in my conversations. Both in my day to day chats with colleagues and on the Standards of Practice board the conversation has definitely changed to how to deal with these properties. What that really means is that we have a conversation on how to deal with the banks that hold the loan.
You see, the sad part of this is that the owners of these properties are no longer making the decisions about selling their own properties anymore. The banks are making the decision... sort of. Check this story out.
(The complete CNNMoney.com article can be found here.)
One example of how price declines can doom a short sale occurred recently in Phoenix. Curtis Johnson, a real estate broker there, worked with a health care worker whose hours were being cut and who could no longer afford her mortgage. She fell behind and decided to sell.
Johnson was able to find a buyer willing to pay $183,000, and got an approval from the lender. The owner confidently moved out, got a new place and started a new life. But the lender folded and the mortgage went to a new servicer, who took six weeks to approve the deal.
"Unfortunately, the buyers who were approved were no longer interested because the real estate market had dropped significantly," Johnson said. "They wrote a new offer, considerably lower then the first, and it was time to start over."
Two more offers eventually fell through before a new buyer was found and the owner's bank approved the price, this time at $163,000. On the day of that closing, however, the parties discovered that the buyer's lender had run out of funds and dropped out of the deal. The home went to foreclosure auction before another sale could be arranged.
The house is now on the market for $139,900.
"[The house is] listed for less than what would have been received had the bank been willing to work with us, and still has not yet sold," Johnson said.
I have heard so many versions of this story from my colleagues. It seems most agents have now experienced this story personally in one way or another.
This is a big issue. Really big. I understand that the banks are trying to make good business decisions and get the most money they can for each bad loan. I also understand that many of the banks don't actually own the loan they are just servicing the loan and answer to investors. But, while the banks are running around not making the critical decisions the number of homes on the market continues to grow... pushing the prices down... and the cycle continues to spiral out of control.
There are actually buyers out there. So, it seems to me breaking this cycle has to start with the banks. They have got to make the critical decision in a timely manner, say overnight, or in 48 hours. No more than you would allow for a non-distressed homeowner to respond to a purchase offer. If the banks can sell these houses and get them off the market, we'll begin to see more buyers enter the market with confidence that the house they are writing an offer on will actually be sold to them and not hung up in red tape for months on end.
Just imagine what would happen to home prices and the economy if we had more houses going off the market than coming on the market...
Banks, heal thyself!
