Short sale process broken, Pleasanton Realtor says
Survey shows some in California being pushed into foreclosure
More than half of Central Valley Realtors characterized closing short-sale transactions as "difficult" or "extremely difficult," according to a Lender Satisfaction Survey conducted by the California Association of Realtors (CAR).
The survey gauges Realtors' experience working with lenders in their most recent transaction. The majority of those surveyed dealt with short-sale transactions, which are transactions in which the lender or lenders agree to accept less than the mortgage amount owed by the current homeowner.
"The survey results demonstrate the ongoing problems homeowners are experiencing with onerous short-sale procedures on the part of lenders and servicers," said CAR Treasurer Don Faught, who is Vice President and Managing Broker for Alain Pinel Realtors in Pleasanton.
Faught presented the findings at a news conference in Fresno.
"Despite assurances by lenders in recent months that they would improve their short-sale processes, clearly, not enough is being done," Faught said. "Lenders are out of touch with the realities of the market and the consequences to struggling homeowners, and the result is unnecessary foreclosures that only make California's economic problems worse, hindering a desperately needed recovery."
The top three obstacles real estate agents most frequently cited in working with lenders and servicers during the short-sale process include lenders' slow response time to a short-sale package, repeated requests for documentation, and poor communication with lender representatives. Some Realtors even indicated that the lender foreclosed on the home before the short-sale transaction could be completed.
Some specific agent comments from the survey include:
"Bank will not come down on price; home needs work, but the bank is being unrealistic."
"Banks say they want to help work things out on short sales, but to be honest, I don't believe they care."
"The whole process is completely flawed."
"The bank took over four months to give approval. They refused to pay common seller closing costs and repeatedly demanded paperwork that had been sent previously."
Nearly three-fourths (74%) of Realtors said it took more than 60 days for lenders or servicers to return a written response on the approval or disapproval of the short-sale agreement submitted. And, half of the respondents said it took the lender more than five days to return any form of communication.
Overall satisfaction with the lenders Realtors worked with in their most recent short-sale transaction remains extremely poor, with 77% saying they were "not satisfied" or "not at all satisfied."
Moreover, almost nine in 10 Realtors (88%) said they were "not likely" or "not at all likely" to refer buyers to the lender to finance future home purchases.
The news conference held in Fresno highlighted a specific case in which a homeowner has been trying to short-sell his home since August 2009. After losing two potential buyers in contract, his lender convinced him to revisit a short sale, but later demanded a cash contribution of $2,000 as a condition of short-sale approval and that he sign a promissory note for a new, unsecured loan of $8,000.
Additionally, the bank has reappraised the home for an amount 31% higher than the initial appraisal, which was conducted only about a year prior. The homeowner now has a third buyer in contract but faces foreclosure because the bank is unwilling to consider another appraisal.
"We all know that a recovery in the housing market is essential to a recovery in the general economy," Faught said. "Lenders and servicers need to take steps now to improve the short-sale process so that the housing market can begin improving."