San Diego Housing Market News and Analysis
Short Sale Experiences
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Submitted by SD Realtor on July 23, 2008 - 11:45pm
I saw some discussion on short sales so I thought I would post a few experiences over the past few months. Right now I have 13 offers out on short sale properties for various clients. In each and every case the buyers are very frustrated at the pace of the lender responses. The topper is a short sale offer we have into Countrywide. That offer was submitted over 3 months ago over which time Countrywide has lost the offers, (ours is not the only one the listing agent sent in) they have had to do 3 different appraisals and 2 different BPOs as again, they said they lost the previous ones. The negotiator has been switched 3 times so far. It is a joke. That same buyer has 3 other offers in on other short sales. The performance by the lenders has not been as poor so we will see....
As sdrealtor pointed out the short sale process is VERY much dependent on the lender. Right now for a listing I have that is a short sale, we have had a 6 day turnaround just to get the lender to say that yes they received the authorization letter from the seller to enable me to work with the lender directly. In this case the lender is Wells. Which kind of surprises me because past dealings with Wells Fargo on short sales have been postive.
Another situation that people need to watch out for is the way in which a lender releases the lien. In some cases the lender will accept the short sale AND release the owner from the deficiency and in other cases the lender will accept the short sale BUT they will ask the owner to sign a new note that is basically unsecured but does obligate the owner to repay the deficiency. In that second case there is usually an impasse which the listing agent can try to work with the lender to release the owner from obligation. If that doesn't work then the owner can try to get an attorney to contact the lender and get the release. No matter what the very bottom line is that it simply adds alot more time and frustration to the process.
What I am seeing (and this is by no means a statement of how it is for everyone) is that it takes at LEAST 4-6 weeks before you get anything of substance back from the lender. Usually the first thing of substance is that they have received everything and a negotiator has been assigned to the case, and an appraisal and/or BPO has been ordered. After that, soon after or sometimes a few weeks after, you get the word that they have everything, it is all done, and it is being reviewed. From then you hope for acceptance AND that they release the seller from the deficiency.
All in all expect 8-12 weeks on average if the offer is a new offer.
Also as I have mentioned many times that ALOT of current listings on the MLS that are ACTIVE are short sales that ALREADY have offers into the lender. Now in alot of cases the lender has already been delivered an offer package and has already processed it. In some cases the lender may have punted on the offer and has told the agent, "look we did our BPO and appraisal, so we will accept x$, otherwise don't bother sending in anything less." Now if your offer comes in and the listing agent has already submitted other offers several weeks ago, the listing agent may simply choose to hold onto your offer. Why? Well the lenders are such a pain in the ass, that the listing agent does not want to trip the lender up and start the process all over again. Even if the offer you make is higher, it may not be worth the hassle of resetting the lender all over again. Additionally if the lender is going to release the seller from the deficiency the seller does not care either. It is kind of a crap shoot and every situation is different. In other cases, some listing agents simply collect offers and send them in as they come.
It really all does vary with the lender. All in all the entire process is frustrating. What is worse is that in the past several weeks the 10 year was up, then edged down, and now is moving up. The mortgage rates when my clients all submitted are indeed higher now.
By the same token, there is no harm in submitting offers simply because there is absolutely no risk or obligation. Just be prepared for a long wait.
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