July 1st 2011 was the the day we finally closed a 605 day short sale for a client who tried to modify and could not qualify. As a result the sellers decided to proceed with a short sale but for a multitude of reasons we ended up going through through six different buyers and a dozen price reductions.
August 2009 was a turbulent time with most banks as they began shifting their short sale servicing systems from fax based processing to uploading documents into a task based system. Bank of America began shifting to web based short sale submissions because they just could not keep up with lost paperwork, missing documents, and lack of support staff. Soon most banks began making their own shift to prevent the endless duplication of effort.
What I Learned and What You Should Know
Through all of this I decided it was important to share the five most important changes that prevented us from closing in less than six months instead of almost two years.
1. The buyer and their agent must be totally committed to the process by putting earnest money in escrow.
2. Always have a backup offer in case the buyer backs out.
3. Investors need to know that your agent knows the value of your neighborhood. Make sure your agent knows how to prepare a broker price opinion to support the value of the purchase contract.
4. Banks and investors are always changing guidelines and requirements for submission of short sale packets. I have a network of short sale specialists that check in with each other to stay on top of recent changes.
5. Sellers must be willing to be patient with the short sale process. The sellers of the property mentioned in this post experienced a roller coaster of emotions all the way to the very end.
The Moral of The Story
Change will always be part of the short sale process, it really has improved and the success rate continues to climb from 20% to 70%. There are too many details to document in one blog post. In short, the process has improved and it can and will continue to get better.
May Foreclosure data didn’t show much of a difference other than the continued climb to a one year average from the time of a default to sale date. This trent continues to show evidence that foreclosure modification efforts and short sales are allowing homeowners more time to help them stay in their homes.
Foreclosure inventories stayed steady with little change to the amount of people who defaulted on their loans(green) and even less sale activity(blue). This is the first month that showed 0% activity in REO inventory levels(red).
Notice of sales increased(blue) while people who received a notice of default fell slightly(green).
Cancellations fell last month reducing the amount of foreclosure postponements for people currently in default(grey). Postponements(cancellations) are a good indicator of modification and short sale activity. The number of properties going back to the banks as a result of a sale increased slightly(red).
The average time a homeowner had before losing their home to foreclosure has continued its steady climb and is close to one year(green). Bank are taking an average of 200 days to sell properties(red).
Project Homeowner
I’m sure by now you must have heard some news about a foreclosure prevention event going on in downtown San Jose this week but do these guys really help where most people have run into decline after decline to a modification request. I can’t really say that NACA will save your home from foreclosure but what I can tell you is what I have seen in my own experience with Project Homeowner.
Project Homeowner
A few years ago the Department of Real Estate and CHASE got together to create a traveling foreclosure prevention roadshow very similar to what you now see on a regular basis at events like the NACA one in San Jose.
- What has changed from few years ago is the investors willingness to participate in such events by allowing the borrower to modify.
- What hasn’t changed are the general guidelines of most investors and that is “Does this modification help the homeowner?”.
Project homeowner was revolutionary because it was able to bring the big lenders to the table (CHASE, Wells Fargo, Bank of America, etc…) and a few years ago lenders did not have staff on the ground to accommodate this need.
What NACA brings to the table
One of the reasons NACA has had much success nation wide is because of the media attention and I would imagine the lenders looking for an opportunity to create positive public relations impact with it’s homeowners.
Some things never change
The bottom line is this;
- If the lender owns the note(your loan) then your chances of a modification increase greatly. If an outside investor owns the note the bank must ask for investor for approval in order to modify your loan.
- Either way this scenario has not changed from past years and can dramatically increase your chances of a successful modification.
It doesn’t hurt to try
I received a call from a client over the weekend asking me if they should try to modify though NACA and may answer was “absolutely yes”. The great thing about this event is that most of the big lenders have staff to help escalate your situation to a level where the decision makers can help you get to your goal.
NACA Foreclosure Prevention infomration:
https://www.naca.com/index_main.jsp
Foreclosure Filings* have dropped over since February as shown by the Notice of Sale indicator down 32% from the previous year.
Foreclosure Outcomes* show cancellations are way up over the previous year possibly fueled by successful short sales. My own experience tells me that modifications made up a very small percentage of these cancellations. REO indicator also shows that properties are not going back to bank compared to the previous year again fueling my thought that properties are having success in short sale and modification attempts.
2011 Foreclosure Inventories* have stayed steady with a steady drop in scheduled sale dates possibly fueled by modifications or short sales.
Foreclosure Timeframes*
The interesting fact about this chart is how many months it’s taking for a bank to foreclose compared to the previous year there are clear signs that banks are moving though the foreclosure process much faster 5.97% compared to 21.66% from the previous year.
*Foreclosureradar.com
The California Association of REALTORS® have released the affordability numbers for the state of California and among them is the very expensive bay area and Santa Clara County is among them. Here is what they found.
- In Santa Clara County only 37% of the population can afford to buy a home at the $545,000 median range.
- The required take home to purchase is $117,630.
- Your monthly payment will be around $2,940.
The Chart below shows the cost of home ownership in California.
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