Just as the overall market has changed and caught many buyers by surprise (and still does), the short sale market for sellers is going through changes and I want you, and anyone you know who might be in a situation where they might need to do one, to be aware of this and not have an unpleasant surprise at some point in the future.
Short sales are typically done when a home or condo owner is financial unable to keep up with their mortgage payments and are unable to work out a lower payment they can afford and so need to sell. In the past years, home and condo owners in this situation had no urgency to list and sell their homes as the foreclosure process was taking a very, very long time and people were staying in their homes for years after stopping their mortgage payments. This is changing.
The big lenders are speeding up the process and as of July 1, 2013 a new law went into effect in Florida that is also speeding up the foreclosure process. Lately I have seen properties which had been on the market a long, long time as a short sale suddenly foreclosed on. There are several I have seen lately and what I noticed is that the lender refiled for foreclosure and then the foreclosure was completed within a very short time (I can think of 2 cases where it was about 3 months). This means that the days of a homeowner thinking they have lots of time to do something and can wait is coming to an end.
This is very important to know because those homeowners (and even those agents who are still operating under the assumption that things are the same as they have been for the past several years) may find themselves foreclosed on when it didn’t need to happen.
My latest 2 short sale listings bring up a point regarding short sales as to why home or condo owners should not be hesitant to start taking action – short sales don’t have to be a lengthy process.
Now I want to state that it is true that a short sale will, in most cases, take longer than a regular sale. However, the situation where most people think it has to take 3-6 months to get an approval from the lender is not really true in most cases.
The first client has a home in Gulfport which had been listed at the beginning of the year and was under contract in mid-February. As of May there was still no approval. Since I had helped someone he knows with a short sale which went very smoothly he contacted me. Both the listing agreement and the contract had expired by June and he let the listing agent’s broker know that he was ending that agreement. The listing agent was also representing the buyer in this case and he let her know so that the buyer could be informed and also so the buyer knew it would be being relisted.
I listed it in early July and the previous buyer submitted a contract through her agent right away, which my client accepted. It took about a week to get updated documentation from the seller and to assemble the short sale package (which was over 100 pages) and it was sent to the lender on 7/11/13.
I received the first communication from the lender about this on 7/24/13 and spent the next month working with them to answer questions and provide them what was needed. I received notice of approval the last week of August and the actual approval letter on 9/5/13 which was a total of 2 months from the date listed, 7 weeks from the date the short sale package was sent to the lender and 6 weeks from the date the lender actually started the process.
The second client has a home in Palm Harbor and it had not been listed before. This client had been reading my newsletters for quite a while and wanted me to sell their house since they had seen that I had the training and experience to get short sales approved.
The house was listed on 8/6/13 and went under contract on 8/8/13. I have found that it is important to get an accurate price when listing a short sale property because banks are not nearly as flexible on price as they had been in previous years since the market is so strong. The owner told me that the bank had done a price evaluation this Spring but had never been able to find out what the value was. I spent quite a bit of time to get the price right and after we got the contract (at full price) I found out from the negotiator at the lender that we were within a few thousand dollars of what their appraisal came up with. What made this one even trickier is the fact that the house has been vacant for the last 3 years but it is still in pretty good condition.
On 8/30/13 we received the short sale approval letter from the lender which was 3 1/2 weeks from the listing date and just over 3 weeks from the date we received the contract.
So if you or someone you know is in the situation where there is a mortgage that is unaffordable – don’t delay taking action because in many, many case the foreclosure does not have to occur and can be avoided. But this is only true if the owner does not wait too long and if the Realtor they work with really knows what they are doing and keep up to date on changes.