More and more, San Diego real estate bargain hunters are making specific requests:
Show me foreclosures, show me great deals, but forget short sales.
Why?
They have learned that about the cost of lost opportunity while they wait an interminably long time for banks to respond. Banks and loan servicers are absolutely overwhelmed with paperwork and pleading phone calls and it can literally take months for a short sale to close.
During that time, vacant homes may be subjected to vandalism, neglect and the elements. Increasingly, real estate agents also avoid showing short sales because of uncertain pricing, uncertain compensation, and the increasing reality that they will be left holding the bag for costs lenders refuse to cover.
Many San Diego Realtors have been burned by lenders and refuse to go down that road again.
The solution?
Prenegotiate all short sales.
Once borrowers indicate they want to sell their over-mortgaged property, lenders should take the initiative to get that liability sold as soon as possible. Order appraisals or BPOs (broker price opinion) immediately, and encourage these borrowers to maintain the property while it is on the market. Perhaps there is an incentive that might be offered to encourage this kind of care? Turn the property over to a competent Realtor, who knows the local market, knows how to market these properties aggressively, and make sure all costs and allocation of fees are clearly defined.
This, as much as anything, might help to restore some order to the markets at the local level and with the international investing community who ultimately provide mortgage funding. Investors in the secondary market know they are going to take a hit. Let them know how much so they can plan and react accordingly. Its the uncertainty thats killing the mortgage market.
Real estate investors, home buyers, and real estate professionals also want to know what price the lender/investor will accept so they can smartly shop and compare properties. Short sales are the chaotic element in the San Diego real estate market because they have uncertain pricing, uncertain timing for closing, and offer uncertain compensation for those who procure the offers.
Once order is restored with that element of the market, I believe we will be on the road to recovery. The failure of mortgage lenders and investors to pre-negotiate short sales will only prolong the agony for all.
Pointing fingers and assigning blame for the mortgage mess wont contribute to a solution. Mistakes and miscalculations were made by all, but its time to get on with resolutions and remember you cant justify a mistake by perpetuating it.
I agree, but how do we get them to do that?
Maureen:
I am in discussion with some other San Diego Realtors, developing a presentation for lenders regarding this very issue. They would be able to bypass the expensive foreclosure process if pre-negotiated short sales were offered up front.
Care to join in?
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I too would love to hear more about your stategy– I think it is a good one– as it edvelops.
Carrie: Stay in touch and in the loop! Lenders throughout the country need to head the foreclosure problem off at the pass.
Most of the investors I talk to in San Diego say banks are not willing to negotiate or they will take something ridiculous like a 7% discount. We can’t get rid of this inventory until the banks become more reasonable.