1700+ Short Sales Stuck Waiting for Bank Approval

August 15, 2011 By Leave a Comment

Short Sales By The Numbers:

5,000

We have just under 5000 short sales currently for sale in the Minneapolis/St. Paul area.

1,700

In the Twin Cities, we now have more than 1,700 short sales that have received offers and are waiting for the seller’s lender(s) to provide a response, 100′s more than we had a year ago.  By the way, this means that 1700+ buyers are tied up waiting for properties they may or may not ever get to buy.

35%

Percent of short sale properties for sale that are currently stuck in Lender Approval Limbo that can run anywhere from a few weeks (rarely) to many months (typical).

5.4

Number of months of short sale approval backlog when considering that over the last 12 months we’re only averaging 322 closed short sales each month.

Commentary

The number of total homes we have tied up waiting for lender approval is probably very close to 2000 when taking into account other MLS statuses and minutia too complex to discuss here.  We are years into this housing downturn and while banks seem to have figured out foreclosure sales and can process those pretty smoothly, they are nowhere close to having short sales down.  Considering a large percent of the failed short sales end up as foreclosures, quickly and properly addressing short sales could literally cut 12+ months off of our foreclosure activity.

Banks: get your stuff together and help us (agents/buyers/short sellers) help you.

Filed Under: Community Issues, Foreclosures and Short Sales, Info for Buyers, Market Stats, Opinion, Personal Experiences, Short Sales

Foreclosures and Short Sales Don’t Matter to House Prices

July 5, 2011 By 7 Comments

While foreclosures and short sales continue to be around 40% of our sales, when looking at housing prices I believe they should be completely ignored.

When looking at all Twin Cities housing sales, here is how the Median Sales Price stacks up:

median sales price - all properties - twin cities real estate

 

When we split it out to look at Foreclosures, Short Sales and Traditional Sales, we see that Traditional Seller prices have not fallen nearly as much as the composite number suggests:

median sales prices for foreclosures & short sales - twin cities homes

 

Why we should ignore foreclosure and short sale sales data

If we go back to 2005 and before, the Twin Cities had almost no foreclosures or short sales… something between 1%-2%.  The Traditional Seller market was the market just 6 years ago and once we clear the current housing downturn they will be the market again.

Still, today when Foreclosures and Short Sales account for 2 of every 5 sales, why should we ignore them?  After giving this a lot of thought the answer seems almost obvious now but certainly wasn’t before:  Foreclosures and Short Sales already affect Traditional Sales’ prices.

Today every seller is competing against all other homes on the market, including bank owned and short sale homes.  Each Traditional Seller that successfully sells their home had to go through the pricing and competition gauntlet to secure a buyer at the price and terms of the sale.  While some Traditional Sellers have stronger motivation to sell than others, they don’t have nearly the motivation to sell as a bank.  Whether a foreclosure or a short sale, the bank ultimately determines the sales price and they’re far more motivated to unload properties at whatever price they can get.  This is similar to a wholesale auction versus a retail sale.  One must also take into account that most foreclosures and short sales typically need money for repairs as well, which further decreases their value at time of sale.

So since Traditional Sales already sell at prices that take into account the competition from Foreclosures and Short Sales, by including them in sales price averages we are effectively double-counting the impact from these distressed properties.  Consequently the truest measure of where our housing market was, is and will be is found by looking at the prices that non-distressed sellers are getting in this market.

Filed Under: Crystal Ball Projections, Foreclosures and Short Sales, Info for Buyers, Info for Sellers, Market Stats, Opinion, Short Sales Tagged With: , ,

A Mortgage Modification in Just 7 Days!

April 27, 2011 By Leave a Comment

The Program

For the past several weeks the Minnesota Home Ownership Center has been piloting an innovative program with Fannie Mae that offers a new and more efficient way for Minnesota homeowners with Fannie Mae loans to access assistance.  This program, known as the Fannie Mae Partnership, builds on the strengths of the Homeownership Advisors Network (statewide counseling network) and maximizes the relationships Fannie Mae has with servicers.

Dedicated Fannie Mae staff that office at the Minnesota Home Ownership Center are able to greatly enhance and improve communications between counselors, servicers and investors and have been empowered to expedite the workout process.

The Process

The process starts with a homeowner contacting a nonprofit foreclosure counselor to discuss their situation and determine if they are a good candidate for a mortgage modification.  This foreclosure counselor is not employed by Fannie Mae or a loan servicer – their interests are solely as an advocate for the homeowner.

If the homeowner is a good candidate for a modification, the counselor works with the borrower to fill out all the required paperwork and collect the necessary documentation from the borrower.  That counselor then forwards the complete package to one of Fannie Mae’s in-house staff at the Minnesota Home Ownership Center for review.

If approved by the Fannie Mae representative, the modification is drafted and sent to the loan servicer for review and acceptance and then sent to the homeowner for their review and acceptance.

The Results

One story I heard from Ed Nelson, Marketing and Communications Manager at the MNHOC, was truly amazing: a borrower that had spent many months working through their servicer for a loan modification and was accepted on a trial modification was subsequently denied a permanent modification even though they had made all their payments on time.  Recently this borrower participated in an early pilot of this program and was able to get a permanent modification approved in just 7 days!

The Impact

To date, the mortgage modification programs have had lackluster results – far fewer mortgages have been modified than had been projected and the stories of borrower frustration and confusion over the process have been prevalent.  This new streamlined program ensures that for Fannie Mae loans, borrowers will have assistance in submitting a complete application to Fannie Mae and should have a response to their request in weeks versus months!

It is unclear how much mortgage modifications are helping to reduce foreclosures but I do believe it has helped keep foreclosures lower than they otherwise would be.  With this new program I’d expect far more approved modifications and thus more foreclosures prevented.  While this program most certainly will not end the foreclosure crisis, it can serve as an important lifeline for borrowers struggling to keep their homes and I think will have a measured impact on foreclosure activity in the future.

The Model for Other Mortgage Note Owners

This program is so simple and intelligent that I hope Freddie Mac and other large holders of mortgages will implement similar solutions – if we were to see this, we’d see even greater results in the future.  It just makes sense!

A similar program to this would also be perfect for homeowners that cannot afford to stay in their house and would rather try to work out a short sale with their lender versus letting the home go to foreclosure. Just like with mortgage modifications, not all borrowers are good candidates for short sales but a streamlined program such as this I believe could literally double or triple the number of successful short sales.

Filed Under: Short Sales Tagged With: ,

Stupidly Slow Short Sales That Seldom Sell

March 16, 2011 By 2 Comments

Here we are, years into the housing crisis, and it seems like while banks have become pretty good at selling foreclosures they are still horrible at closing short sales.  On average, short sales a have substantially lower chance of closing than traditional or bank owned listings, which means a huge number of short sales fail and go back to the bank as foreclosures.  At the end of the day, short sales sell for far more money than they do as an equivalent foreclosure so each failed short sale means thousands or tens of thousands of dollars more value lost:

 

While both Traditional listings and Lender Owned listings have had a decrease in days on market, Short Sales continue to see increases in days on market, which means that the response time from lenders is not improving but likely worsening!!!

 

If we can get more short sales to close then we will see fewer foreclosures in the future and less pressure on housing prices across the entire market. A successful short sale cuts a good 6-12 months from the housing crisis but only if the lenders, servicers and mortgage insurance companies work together to accomplish this task together.

Filed Under: Community Issues, Foreclosures and Short Sales, Info for Buyers, Info for Sellers, Market Stats, Opinion, Personal Experiences, Short Sales Tagged With:
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