BofA Announces Shortened Short Sale Process

Bank of America announced it is refining its short sale process to streamline its approval process and reduce the wait in accepting offers and making it to closing. The changes are expected to trim the bank’s decision time in half — from 45 days or longer to 20 days, Inman News reports.

Starting April 14, the bank says it will permit its short sale specialists, using a third-party platform called Equator, to complete document collection, valuations, and underwriting at the same time, which is expected to help speed the process.

Bank of America also announced starting April 14 that real estate agents will be required to submit five documents in short sale transactions to be considered by the lender. These required documents include:

A purchase contract including Buyer’s Acknowledgment and Disclosure form
HUD-1
IRS Form 4506-T
Bank of America Short Sale Addendum
Bank of America Third-Party Authorization Form

Source: Bank of America and “Bank of America Streamlining Short-Sale Procedures,”” Inman News (April 10. 2012)

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Is Inexperience Hampering the Short Sale Process?

Inexperienced real estate professionals are to blame for hampering the short sale process, according to two real estate professionals who specialize in distressed sales.

“The banks know who’s experienced and who’s not,” said real estate pro Travis Waller at a recent conference in New York. “If you don’t present the files correctly to the bank, you’re going to get put at the bottom of the pile. When the banks recognize you know what you’re doing with your presentation of the documents, you’ll get a call within a few days.”

The flood of short sales on the market have prompted many in the real estate industry to refocus their careers, finding it to be the main driver of business nowadays.

But “many short sales are lost to foreclosure because of the inexperience of the listing agent,” Waller said.

Waller said that borrowers he’s worked with have already missed four to seven mortgage payments before they come to him, which means he must work quickly on a short sale deal before the property falls into foreclosure.

“You are working under the gun as a short sales agent. If you don’t know what you’re doing, then time is just ticking away,” he said.

Home Affordable Foreclosure Alternative program agreements in the short sale process can be completed in as few as 60 days by experienced agents, he said.
Source: “Inexperienced Real Estate Agents Causing HAFA Short Sales to Fail,” National Mortgage News (Jan. 14, 2011)

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What is a short sale?

A short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers’ mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner’s commission. The seller is unwilling or unable to cover the difference.

Some — although by no means all — short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.

Tip: Losing your home can be very emotional and most people don’t want to face up to the reality until foreclosure sets in. “You have to have to have a very soft sell approach, but still keep sellers focused on getting forms and paperwork complete,” says Sheryl Thomson, associate broker, Exit Island and Beach Realty, Merritt Island, Fla.

Other sellers simply don’t understand that if they have assets, such as stocks or a high-salaried job, a lender is not going to let them just walk away from a short sale without signing a note to repay what they owe, says Steve White, broker with Keller Williams VIP Properties, Santa Clarita, Calif.

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NAR Resource to Reduce Short Sale Stress

According to the most recent REALTORS® Confidence Index, buyers continue to be discouraged with the extended short sale process, which frequently results in foreclosures that could have been prevented.

New resources from the National Association of REALTORS® aim to help REALTORS® and consumers successfully navigate the short sale process to help more home owners avoid foreclosure.

“Our members report that short sales are often riddled with delays and red tape,” said NAR President Vicki Cox Golder. “NAR has worked tirelessly to provide REALTORS® with the resources they need to navigate short sale transactions, as well as provide guidance on helpful government programs designed for home owners facing the process.”

Full Details….

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NAR Resource to Reduce Short Sale Stress

According to the most recent REALTORS® Confidence Index, buyers continue to be discouraged with the extended short sale process, which frequently results in foreclosures that could have been prevented.

New resources from the National Association of REALTORS® aim to help REALTORS® and consumers successfully navigate the short sale process to help more home owners avoid foreclosure.

“Our members report that short sales are often riddled with delays and red tape,” said NAR President Vicki Cox Golder. “NAR has worked tirelessly to provide REALTORS® with the resources they need to navigate short sale transactions, as well as provide guidance on helpful government programs designed for home owners facing the process.”

On April 5, 2010, the U.S. government will implement the Home Affordable Foreclosure Alternatives Program (HAFA). Part of the Home Affordable Modification Program, HAFA helps home owners who are unable to retain their home under HAMP by simplifying and streamlining the use of short sales and deeds-in-lieu of foreclosures. Home owners must meet certain requirements to participate, and incentive payments are provided to home owners and servicers.

To help REALTORS® understand HAFA and its guidelines, NAR has released a brochure about the Home Affordable Foreclosure Alternatives Program and additional resources online, including government forms and guidelines, a video explaining the new federal guidelines, and frequently asked questions.

Designed to help REALTORS® explain the new program to home owners, NAR’s HAFA resources explain how the program aims to streamline short sales and, in the process, save more families from foreclosure.

“The new guidelines and incentives as part of HAFA are a crucial step towards reducing problems with the short-sale process, and REALTORS® are ready to help make this new program a success,” said Golder.

In addition to its resources on HAFA, NAR launched a Short Sales and Foreclosures (SFR) Certification Program in August 2009. The SFR program is offered by the Real Estate Buyer’s Agent Council of NAR and includes training on how to manage short-sale, foreclosure, and real-estate owned transactions.

— NAR

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Distressed Sales Remain a Concern

Twenty-nine percent of recent buyers purchased a home in foreclosure or through a short sale, according to the latest REALTORS® Confidence Index. REALTORS® who participated in the survey are also concerned about a growing number of foreclosures and the hurdles buyers face in short sales.

The RCI is a key indicator of housing market strength based on a monthly survey of more than 50,000 REALTORS®; in a typical month there are more than 3,000 usable responses. Practitioners are asked about their expectations for home sales, prices, and market conditions; they also share their insights regarding buyer preferences and financing options and how those factors are influencing real estate markets nationwide.

“REALTORS® are on the front lines with buyers and sellers in today’s market and have valuable insights into real estate trends,” NATIONAL ASSOCIATION OF REALTORS® President Charles McMillan said. “The volume of distressed sales that our members are reporting underscores the importance of the recent tax credit extension. By putting cash in the hands of financially healthy home buyers, the credit will continue to help draw down inventory and stabilize home prices to encourage a strong and sustainable housing recovery.”     Full details..

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Distressed Sales Remain a Concern

Twenty-nine percent of recent buyers purchased a home in foreclosure or through a short sale, according to the latest REALTORS® Confidence Index. REALTORS® who participated in the survey are also concerned about a growing number of foreclosures and the hurdles buyers face in short sales.

The RCI is a key indicator of housing market strength based on a monthly survey of more than 50,000 REALTORS®; in a typical month there are more than 3,000 usable responses. Practitioners are asked about their expectations for home sales, prices, and market conditions; they also share their insights regarding buyer preferences and financing options and how those factors are influencing real estate markets nationwide.

“REALTORS® are on the front lines with buyers and sellers in today’s market and have valuable insights into real estate trends,” NATIONAL ASSOCIATION OF REALTORS® President Charles McMillan said. “The volume of distressed sales that our members are reporting underscores the importance of the recent tax credit extension. By putting cash in the hands of financially healthy home buyers, the credit will continue to help draw down inventory and stabilize home prices to encourage a strong and sustainable housing recovery.”

Despite the high volume of distressed sales, REALTORS® report that their buyers encounter various challenges associated with these types of sales. Buyers who present a short sale offer can wait months before hearing whether their offer will be accepted. In addition, REALTORS® are also seeing increased competition for foreclosed properties, and multiple bids are sometimes driving sales prices over list prices.

Aside from the demand for short sales and foreclosed homes, today’s buyers are increasingly interested in a home’s energy efficiency and proximity to transportation corridors, reflecting concerns about rising energy costs. Many REALTORS® are seeing a growing preference among buyers for smaller homes, as people look to downsize and cut expenses.

Mortgages insured by the Federal Housing Administration are the primary lending vehicle for many buyers; 24 percent of recent buyers used an FHA loan to finance their purchase. However, more than one in five recent buyers—21 percent—paid all cash.

Source: NAR

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Shorting Bank of America

We all know a short sale is when a homeowner and the bank that holds their note agree to sell for a price that’s less than the amount of that note.  It’s sort of a win win, in that the seller walks away without having to fund the deficiency, and the bank doesn’t have to worry about taking back another property via foreclosure.

Short sales are, in short, all the rage. Along with other distressed sales, including straight up foreclosure auctions, and REO sales, short sales are painfully common these days. I too find that they’re all the rage, but for me the rage is more like the way they make me feel and the frustration that boils into a mild form of pencil throwing rage. The problem is that banks treat short sale requests as if they’re doing the buyer a favor, and I think it’s the other way around.

Last August, while searching for a run down home to buy in hopes of making some money off a future sale, I stumbled upon a forlorn home outside of Fontana. It was a sad little home. Hiding behind Williams Bay style weeds. This humble shack had been abandoned, and it was a perfect remodel candidate for the less puffy lipped Lake Geneva Jeff Lewis.

I remembered that the home had been on the market a few years earlier, so I contacted the previous listing agent only to discover that my little weed adorned pig was heading to foreclosure. In an attempt to stall the foreclosure, I wrote an offer and had it quickly accepted by the seller, pending short sale approval by the lender.

The lender was Countrywide, which is now big bad Bank of America. In order to really follow the baffling nature of the short sale process, I must provide you with some detailed financials. The purchase price was $125k, while the loan with B of A was for around $116k. There was a small amount of commission due to the previous listing agent (since she was nice to me), and that was the deal.

What transpired over the next 11 months would blow your mind (unless you deal with these often, in that case, it’ll sound familiar), so you better put your ear plugs in to contain the mess.

This short sale catastrophe was punted around within the less than focused BA short sale department. We’d have the file opened, but only after faxing the paperwork literally 10 different times (probably 30 pages per fax), and then, systematically, BA would close the file down after a few months. They’d schedule the property to go to foreclosure, only to have the foreclosure auction postponed at the 11th hour. They’d call us looking for additional documentation, which we’d provide, and then they’d go dark on us.

The short sale department and the foreclosure department are two different departments that seemingly communicate with each other via the soup can and string method. So poor is the communication in fact that the day before the property was foreclosed on at sheriff’s sale, I had communicated with the short sale department who had asked for yet more documentation.

The attitudes of those working these short sales is pretty horrible, with no motivation to provide anything resembling customer service, and seemingly possessing no idea as to what the goal of BA should be. That last sentence is the problem, and it’s really unfortunate. BA and other large banking institutions, for all of their losses in the market, have employees who are either misinformed of the goal, or who are being led by supervisors who don’t understand the goal either. The goal should be to own fewer properties. Banks lend money, they don’t manage real estate portfolios that now number in the hundreds of thousands of units.

Bank of America, please listen up. I know what’s wrong with you. I know that even though your earnings looked ok last month that you’re struggling, and you’re taking on water faster than the Titanic post iceberg.

The problem in my opinion is in the attitude of your short sale and distressed sale department. If you want to limit your losses, why are you impossible to deal with? We’re not talking about loan modifications here, we’re talking about short sales. We’re talking about cutting bait and running, which represents a clean and concise option for moving forward. Unlike doomed loan modifications, there’s nothing confusing about a short sale and the intended result. The goal should be to own less property, limit losses, and get the bad loans off your books. If that’s the goal, why is your procedure running in an entirely counterproductive manner that makes that goal nearly impossible? I don’t get you BA, and I’m here to help.

As much as I love selling real estate, I will consider helping you out. Not because I’m some real estate savant (oh fine), but because I know what your problem is, and if you‘ll lean in a little, I‘ll be quite clear.

If you know on a C level what it is you want to do, that message is being lost as it makes its way to the processing departments. The short sale is there to help the homeowner yes, but it’s more important in my opinion when used as a method to limit losses on the bank end of things.

The short sale gives you an out, and it’s a determinable, quantifiable loss that you’re facing, which is a far cry from the time and additional money lost when you consider the REO option. Need some proof of what I’m talking about?

I was at a closing last week with an agent, and we were discussing how much we hate short sales. She gave a great example, and it involved a home that had an outstanding mortgage of around $500k. It was a BA loan as far as I remember, and she wrote an offer on it with a short sale contingency for $416k. BA rejected the short sale offer, and claimed the property via foreclosure a couple months later. When the property was relisted as REO, it ultimately sold for $260k. (these numbers are roughly correct, but not down to the penny). You see what I mean BA? You outsmarted yourself to the tune of $156k, not including commission paid, attorney fees paid, and additional interest lost, which probably brought the total much closer to $175k. $175k loss on one sale? Some studies say that an average foreclosure costs a bank $50k, but that seems too high for me, so I’ll stick with the lower figures.  I don’t care how good your second quarter earnings were, just imagine if you didn’t lose $175k quite so often.

What happens now? Well, now I wait and buy this home back when it’s reborn as REO property. I originally bid $125k. The auction price was around $130k, and I’ll make a wager that I’m able to buy it for less than my original bid in about 60 days when it hits the market as an REO property.

BA, you’re the loser here, and I wish you’d just contact me so I can show you how to limit your losses and make even more money. Until then, I’ll continue to benefit from your sloppy short sale department, a department that interjects every obstacle possible as it fights to avoid short sales, preferring instead to lose more money several months later via foreclosure.

Just remember the bank is the beneficiary of the short sale just as much as the homeowner, and until that simple concept is understood by the banks themselves, pursuing short sales will continue to be a magnificent waste of time.

David Curry is a Realtor in Lake Geneva, WI. He writes a blog at www.genevalakefrontrealty.com/blog

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