Lenders Don’t Seem to Have A Clue on Short Sales

Felix Santiago from Palm Beach Florida wrote an interesting post on Short Sales “What The Lenders Won’t Tell You About Your Short Sale”   Felix had four main points.   The first one:

1)   The lenders still are not sure that what they are doing is right FOR THEM. They are constantly changing their short sale and loss mitigation process to figure out what will make  the most return on the loss.   It will change at the whim of those assigned to review the pipeline disaster that is their loss mitigation.   And, time and time again, the changes  usually are not for the best.   They only further complicate the process.   The banks are in the business to lend money.   The whole loss mitigation and short sale business is still a blur to them.   Think about how absurd this business is…they will forgive $300,000 on the property without blinking,  but will kill a short sale for the remaining $5,000.

I can believe this, not just from personal experience dealing with one of our listings but from the statistics I’m able to pull daily from the Tucson MLS.

Here are the Short Sale and REO closed transaction statistics I pulled a few minutes ago for July

REO Sales

Total 101
Average Sale Price $154,568
Median Sale Price $131,500

Taking the median sale price we see a difference of $43,500.   It is to the banks advantage to sell these properties as short sales vs REO   there is a larger return on investment.   But they don’t, they drag their feet stretching the process out for month and months.   Offers come and go as potential buyers get tired of waiting.   Many of these properties are vacant, they are not being maintained and the value of the property the bank holds is declining every month they drag their feet.

But as Felix says above in another one of his points.   These Homes are Widgets to the bank.   They never see them, they know nothing about them.   They don’t know if there is a pool with water going green and pool filters and motors burning out due to evaporation of the water.   They don’t seem to care.   They never inquire.   It is just a widget.   As if a home were something in stasis.   In a box on a warehouse shelf till they got ready to deal with moving the inventory.

Homes aren’t widgets.   They require regular and routine maintenance.   Therefore, what could/should be done?

Change the process. Get someone assigned to deal with these assets while they still have most of their value.   It is time the system and process changed.   Banks having to deal with short sales isn’t something new.   This has been an issue for over a year.   It will continue to be an issue as long as the system doesn’t change.

In the least, put in process a means to see that these assets are maintained or put into a state where they won’t be losing value during the process.   If there is a pool have it maintained or drained as one example.   Here in Tucson West Nile virus is an issue, stagnant pools as breeding grounds for mosquitoes is not healthy for the neighborhood or community.   Dealing in a timely manner with a property in short sale should be bank priority, instead even after a year they don’t seem to have a clue how to handle the process.   Instead, they wait for the process to turn into an REO which they seem to know how to deal with and in so doing take an lose on average here in Tucson of over $43,000 per property.