Short-sale Success!

We’ve all heard and read about short-sale nightmares. I’ve written about them several times myself. They banks can turn them into terribly long, complicated, frustrating ordeals, and they often end up forclosing.

This isn’t always the case, however, and they’re getting better and better every day. Why? Lots of reasons, but mostly it’s about money. Yes, there is pressure from the government, the press and the public for the banks to do a better job of processing short-sales, but the bottom line is the bottom line. It can be cheaper for a bank to accept a short-sale, a pay off of less than what is owed, than to foreclose on the property and gamble that they can make more by foreclosing.

Looking at one of my posts from last month, I gave the example of having a buyer willing to pay $310,000 for a short-sale. Bank of America did a horrendous job of processing it, losing documents, sending the file to different parties, and generally dragging their feet, until the buyers pulled out and the property was eventually sold at foreclosure for $214,000. B of A could have made $96,000 more by approving the short-sale. The investor who bought it, fixed it up a bit and sold it for $282,000.

So, what are they doing to improve? Some have implemented online systems for uploading documents and communicating with the listing agent and negotiator. No more lost files or busy signals on fax machines. Others are streamlining procedures. One even has representatives in the community rather than having us deal with call centers on the other side of the country.

The government’s HAFA (Home Affordable Foreclosure Alternatives) provides guidelines and incentives for banks to processs and approve short-sales.

The result is that more are getting approved, and in shorter time. There can lots of bumps in the road, but the payoff can be great. How great, you ask?

Here are a few that I’ve sold in recent months:

An investor client paid $87,000 for a 2 bed 1 bath home in Sacramento which sold for $205,000 6 years ago. It is tenant occupied and the tenant has a 2 year lease on it.

A couple in Orangevale had to sell, but found that their 5 bedroom 3 bath home wasn’t worth the approximately $330,000 they owed on it. I was able to get my first time home buyer in it for $205,000.

A family relocating from Seattle bought a very nice 3700 square foot home in Folsom, which sold for $650,000 in 2006, for $442,000.

With property values unlikely to rocket upwards in the near future, short-sales are likely to be here for years to come. In Folsom, exactly half of the properties listed today are short-sales.

So, for the patient buyer they can be great deals, and for the upside down seller, major debt relief.

We’ll talk about the debt relief next time on Heard About Real Estate. Any questions?