Today, I pulled up the expired listings for all Los Angeles County dating from 11/26-11/28. I came up with 63 expired listings, homes that failed to sell, or the contract expired and was cancelled by the listing agent. In the past year, that would have been between 100-120 listings on any given Monday. It took me a minute to get my head around this, but lenders are, finally, moving these assets/homes off their books. Make no mistake, distressed properties are still coming to market, either through short sale or REO transaction, but they are being sold at a rate that allows the bank to eliminate some of their shadow inventory-just to take on more inventory. Most lenders are taking 70 cents on the dollar. Some buyers are not patient enough to see the process through and walk away before the approval is granted my the bank. Some people are discouraged by the stigma attached to the short sale process, created by inexperienced agents and the reluctance by the banks to budge on the price offered. Eventually lenders came to understand that if the home didn’t sell at either an auction or a short sale, they would be forced take the home back and assign it to an asset management company. This process requires the bank to continue to pay the property taxes, keep the utilities on, pay contractors to renovate the property, protect the home against vandalism ect. -just to gamble that they would recover all these additional costs at the point of sale. It’s a big gamble that the lenders are no longer willing to take in this declining economy. I keep seeing multiple offers on homes that are priced for quick sale. There are plenty of buyers in the market and still many sitting on the sidelines just waiting of the market to “bottom out”. Where’s the bottom? Have we seen it? Mid Summer 2012? But you can’t go wrong when you see homes at prices dating back to the beginning of the last decade. I will be going to an inspection tomorrow for a condo, that my buyer offered below asking, which will close in under 30 days. She’s extremely happy to get into her dream home in her price range, regardless what happens to the market. No one can predict the future. We live in the now. The now is 3% mortgage rates and home prices dating back to 2003, or as low as when the housing boom started 10 years ago. Call us for a free consolation about buying or selling a short sale property.

1 in every 295 homes in Los Angeles County received a foreclosure filing in October 2011. Do you really think we’re out of the woods? I suspect this will go on for another 5-7 years before the housing crisis is truly over. So if you think that you are missing your opportunity to get in the market and buy a home, don’t be dismayed. Ideally, Saving a 20% down payment and taking your time searching for the home that you truly want is positioning yourself for future economic security and growth. By putting 20% down, you avoid PMI (private mortgage insurance), which typically equates to .0098% of the purchase price. When divided by 12 months on a $400,000 home, the payment is $326.66 per month. That can be a hefty payment to carry every month along with your mortgage payment. Pay down all your credit cards and be as close to debt free, so the only payments that you have are car and mortgage. This as close as I get to sounding Suzy Ormanesque. But don’t feel you missed the boat just because friends have purchased a home. Many people bought homes at the height of the market and regret it. Contact me today about qualifying for a mortgage or looking at short sale homes. Some are discounted as low as 30% and that just might be the opportunity that you’ve been waiting for.

It is not a secret that getting a short sale approved can be a long and uncertain process, often taking sometimes 60-90 days and longer, upon getting an approval letter. Why do they take so long? Is it simply bureaucracy at big banks? The root cause can often vary. Last week I was at a seminar on short sale properties put on by Chase, where they described the approval process in more detail than most consumers (and their agents) ever think about. The real reasons that it takes so long are that there can be multiple decision makers behind the scenes. Let’s take a look at the main reasons that short sales are so slow.

Seller information packet delays To sell your home as a short sale, you must apply for it as the seller. When staring the process, there’s must be a complete short sale package that must be submitted to the bank or banks, depending on how many liens are on the property, from the seller, in addition to the offer. That package must include a hardship letter describing why the seller can no longer afford to make the mortgage payment. This package must include tax forms, pay stubs, etc., just like when they purchased the house. Short sale sellers are notoriously slow at submitting this information, and the process doesn’t actually start until it is submitted. It could take weeks for the seller to get them everything they need, so if you are trying to buy a short sale, make sure that your agent pesters the seller to get this done in a timely manner. Nothing will happen with your short sale offer until this is complete.

Delegated authority Just because you pay your mortgage to Bank of America does not mean that they own the loan. In fact, they are likely just servicing the loan on behalf of loan investors like Fannie Mae, Freddie Mac, or other mortgage investment funds. When a large bank is servicing a loan, it is given “delegated authority” to make decisions on a short sale. The investor on the loan will say “If you get a short sale within this price range, go ahead and approve it. If it is out of that range, send it to us and we’ll decide.” Each loan investor has different documentation and approval requirements, so the bank has to submit to them for a decision. You may or may not be able to find out exactly who owns your loan, though even if you do, it is unlikely that you will be able to contact them to expedite their decision.

2nd mortgages and liens If there are two mortgages on a property, the second mortgage holder must also approve the short sale. Usually the amount they are owed is being totally wiped out, but the practice right now is that most of them will allow a short sale to proceed with some token payoff of the 2nd lien. Could be something like $5000 or 10% of the unpaid balance. Sometimes that will match what the 1st mortgage is allowing, and sometimes it will not. Other liens can also be problematic and require negotiation during a short sale approval. If there are tax liens, utility liens, contractor liens or other private party liens, those parties must agree to release their interest in a property for a successful sale to occur. Many will agree to negotiate, but this adds time to the process.

Mortgage Insurance (PMI) Many loans may have a mortgage insurance policy against them. As a consumer, this is where you pay Private Mortgage Insurance (PMI) as part of your monthly payment to protect your lender in the case where you default. Sometimes there are hidden mortgage insurance policies that your lender took out on your loan behind the scenes to protect themselves. If there is mortgage insurance on your loan, the mortgage insurance company is yet another party that must approve the short sale, since they may be paying a claim to the lender because of your default. More approving parties equates to longer processing times.

Tips for a faster short sale approval There are strategies that can help expedite the approval of a short sale. The most important one is to make sure that the seller is motivated to provide the required information to the bank quickly. This means that the short sale approval packet is submitted with, or shortly after, the completed offer. This also applies during the process. If the bank wants more information (pay stubs, bank statements, letters, etc.) provide it as quickly as you can. Complaining about or fighting their requests isn’t going to help. They need the documentation for a reason. The same applies to anything requested from the buyer. If the bank wants documentation signed, every day it takes you to respond is a day further away from an approval. Going into a short sale, you also want to understand how many liens there are against it, as this can have a direct impact on how long the process takes. One or two mortgages are commonplace, but if there are other liens, you need complete visibility on what those are and the likelihood that they will release the lien. The process remains bureaucratic, and big banks remain overloaded with short sales, but approval times have improved and banks are motivated to successfully approve short sales, rather than foreclose on the home. Whether you are a buyer or a seller, working with a real estate agent who has a track record with short sales can make the process go smoother.