“When the buyer lowered the offer, we had to almost start the process all over again,” Bauwens said. “Short sales are a very complicated process, and at times we have to get approval from the bank and the investor on the loan and the second lien holder. We are working on ways to improve technology and resources so we can get an approval in the hands of Realtors as quickly as possible.”
Sometimes buyers are willing to wait on what they believe is a good deal. Sometimes they walk away. Davis’s client, two aid workers currently stationed in Kenya, didn’t mind the 10 months it took to purchase the property. They bought the Silver Spring townhouse for $214,000. It originally sold for $380,000 in 2005 and had been on the market for 285 days.
Writing down loans is a tough business. Short sales involving home-equity lines and second liens often require the junior lien holders to write off the loans altogether. But when lenders hold on to offers, hoping that a better one will be presented, they risk not only losing the buyers, but that real estate prices will fall.
“We see this all the time,” Davis said. “Banks stop communicating as they wait for better offers. Then months go by.”
When an offer is finally accepted, if a home doesn’t appraise at the buyer’s first offer price, they lower their offer. That’s what Davis’s buyers did — lowering the offer on the townhouse by $33,000 after it didn’t appraise.
To avoid such long delays, the new Treasury rules requires banks to establish fair market-value prices on homes at the front end of the short-sale approval process, instead of waiting until after offers start rolling in. They can modify that price if a real estate agent is willing to sign an affidavit stating that the new price reflects its market value.
“I think if lenders can make it work, it could be amazing. But the issue we see time and again is a hold up getting banks’ approvals,” said Guled Kassim, who works on more than 40 closings a month as a settlement officer with Atlantic Title & Escrow in Bethesda.
“Banks have to be convinced that the sales price is market value and that a reduced payoff amount is better than foreclosure,” added Kassim, who bought a distressed property using Flaherty Group last year. “Essentially, you’re asking lenders to take a bath. It’s not a business model most companies have set up. They are very doubtful about pricing, which is why I think the 10-day timeline may be wishful.”
To quicken the pace of its own short sales Bank of America has launched a pilot program for customers and real estate agents to help them through the process.
“If an offer is received, we will be in a position to approve the sale within two weeks,” Bauwens said. “This program is currently in a limited pilot stage, and we hope to expand it soon.”
The bank has also deployed a password-protected Internet portal that agents, sellers and bank employees can use to track short sales in real time, communicate and exchange documents, Bauwens said.
“We hope the new rules revolutionize the short-sale situation,” said Jeff Lischer, managing director of regulatory policy at NAR. “It has the potential — by setting deadlines, identifying property values upfront and providing standardized forms.”
washingtonpost.com
