just an oppinion

[Gkette]

Ok. I'm just proposing an idea here. I truly believe that this would actually help the economy and would cost the banks money....and only the banks money. If you're a Realtor, start pointing your buyers towards homeowners who are looking to sell their home in short sale. Obviously, we know that a bank owned property will go for a discounted sale price. Well heads up, so will a short sale from someone who is 4-6 months late on their mortgage payments. Realistically, you will probably get just as strong of a discount on properties as you will from REO,but by directing buyers toward Short Sale possibilities, yoru helping someone, as well as saving the buyer some money. We all know that once a house is sitting empty for about 6 months, its gonna need some work. Who knows how much money these buyers are putting back into the REO they just bought in just standard upkeep and playing catch-up on scheduled maintenance. Also, we get to stick it to the banks... They are gonna be sitting on homes, that are REO for much longer, as well as discounting properties for short sales....Its a no loose for the public.

Well Just my thoughts,
Thanks for listening,

Very good first post, Gavin. However, private advertising is not allowed here and spammers are banned. Please no links to businesses. AC

[StartingOver08]

Gkette, I would love to point my buyers to the short sale properties HOWEVER, in our area the short sales don't close. Running the statistics in our county, most of the short sale properties receive offers and the offers are signed contingent upon the bank's approval. Less than 10% of the short sale properties that were under contract actually close.

Is that because the offer was too low? NO.
Is it because the buyer and seller have something in the offer making it not viable for the bank? NO.

It is because the bank comes back with a counteroffer (if they ever counteroffer) with something that the SELLER can NOT do! Usually the bank requires the seller to come to the closing with a lump sum payment to the mortgage insurance company. It is a substantial payment ($10,000 or more). Hello,...the seller is in a hardship, having access to $10,000 is not your typical hardship seller. OR the bank asks the seller to sign a note to pay X amount (X varies widely $20k, $30k, $60k...$100k) back to the bank over the next 10 to 20 yrs. This is usually at zero interest, but it is still a substantial sum - this is in addition to the bank receiving the funds from the short sale closing.

BTW, before you say "my loans do not have mortgage insurance" - your loans may have LENDER PAID mortgage insurance. The lenders were putting lender paid mortgage insurance on loans starting at about 2000 no matter what the LTV was - to sell the loan (remember the CDO's). The lender could 'credit enhance' the loan by adding MI. The payout on lender paid MI is anywhere from 19% to 35% of the original mortgage issued. The kicker is, in order to receive the funds from the insurance company, the lender has to foreclose on the property AND they must show market time of at least 90 days.

Now, I have even approached the buyers' to pay the lump sum to the mortgage insurance company - and sometimes that works. Hence, you have some closings. Most of the time, depending upon the buyer, the negotiations have taken so long (3 to 6 mths) that the value of the property has dropped again and the buyers offer is now too high! So they walk.

Of course, as a Realtor, all this time is unpaid. We only get paid when the transaction actually closes. If there was even a 50% chance of the transaction closing, it makes a lot of sense to work short sale properties. When there is a 90% failure rate because of the banks policy not to accept short sales due to the MI payout - then it makes no sense to work short sales. Not for anyone - the seller, the buyer, the realtor, the title company, the lender that is going to issue the loan to the buyer. This is a lot of wasted time. If the lender would post the policy right away and say: This property is eligible for short sale or not - then we could get through the inventory faster. The eligible properties would move right away. The other ones would proceed through the foreclosure process and the glut of UNAVAILABLE INVENTORY would be substantially reduced. JMO.

[jribe]

I agree! Here in CA, from what i have seen myself and heard from others- short sales are a nightmare! The banks hardly ever accept the offer, even when there's a signed contract between the seller and buyer...It just takes months of going back and forth- and both sides end up losing. People just don't want to waste their time with short sales. The odds aren't in our favor as you have said Startingover.

Gkette, I would love to point my buyers to the short sale properties HOWEVER, in our area the short sales don't close. Running the statistics in our county, most of the short sale properties receive offers and the offers are signed contingent upon the bank's approval. Less than 10% of the short sale properties that were under contract actually close.

Is that because the offer was too low? NO.
Is it because the buyer and seller have something in the offer making it not viable for the bank? NO.

It is because the bank comes back with a counteroffer (if they ever counteroffer) with something that the SELLER can NOT do! Usually the bank requires the seller to come to the closing with a lump sum payment to the mortgage insurance company. It is a substantial payment ($10,000 or more). Hello,...the seller is in a hardship, having access to $10,000 is not your typical hardship seller. OR the bank asks the seller to sign a note to pay X amount (X varies widely $20k, $30k, $60k...$100k) back to the bank over the next 10 to 20 yrs. This is usually at zero interest, but it is still a substantial sum - this is in addition to the bank receiving the funds from the short sale closing.

BTW, before you say "my loans do not have mortgage insurance" - your loans may have LENDER PAID mortgage insurance. The lenders were putting lender paid mortgage insurance on loans starting at about 2000 no matter what the LTV was - to sell the loan (remember the CDO's). The lender could 'credit enhance' the loan by adding MI. The payout on lender paid MI is anywhere from 19% to 35% of the original mortgage issued. The kicker is, in order to receive the funds from the insurance company, the lender has to foreclose on the property AND they must show market time of at least 90 days.

Now, I have even approached the buyers' to pay the lump sum to the mortgage insurance company - and sometimes that works. Hence, you have some closings. Most of the time, depending upon the buyer, the negotiations have taken so long (3 to 6 mths) that the value of the property has dropped again and the buyers offer is now too high! So they walk.

Of course, as a Realtor, all this time is unpaid. We only get paid when the transaction actually closes. If there was even a 50% chance of the transaction closing, it makes a lot of sense to work short sale properties. When there is a 90% failure rate because of the banks policy not to accept short sales due to the MI payout - then it makes no sense to work short sales. Not for anyone - the seller, the buyer, the realtor, the title company, the lender that is going to issue the loan to the buyer. This is a lot of wasted time. If the lender would post the policy right away and say: This property is eligible for short sale or not - then we could get through the inventory faster. The eligible properties would move right away. The other ones would proceed through the foreclosure process and the glut of UNAVAILABLE INVENTORY would be substantially reduced. JMO.