A recent analysis of more than 1,000 distressed properties in 25 states suggests lenders and loan servicers stand to lose billions of dollars because they are either underestimating or overestimating property values when deciding whether to foreclose on a property or do a loan modification or short sale. – Inman.com, 1/28/2009
What a surprise! Those of us handling these frightening deals know only too well that lenders don't have a clue about value, if they even manage to get to the point of establishing the worth of the hundreds of thousands of properties now on their short sale, auction and bank-owned dockets. It’s not surprising for offers to pile up well-priced lender-approved properties that will never be reviewed or approved. One mortgage rep who intervened for me on multiple occasions on a short sale with his well-known but short-staffed bank, finally just told me, “Roberta, the bank can’t handle the volume. This deal won’t happen.” And, so, despite daily entreaties to the lender, after 4 months a perfectly able buyer with a perfectly good offer departed the scene, leaving the house and its occupants more vulnerable than ever. Yet bank negotiators keeping zinging hollow phrases like "keep trying" and "hang in there." My sad homeowner said he almost couldn't bear to keep showing the house, for every visitor reminds him of how he has failed.
And so, while happy-go-lucky investors throwing money at multiple short-sale properties may not mind the long wait for a property such as this, many conventional buyers are saying “enough” to their short sale and foreclosure experience.
Now, professors Norman Miller and Michel Sklarz (U. San Diego Burnham-Moores Center for Real Estate), in "Home Pricing in Rapidly Changing Real Estate Markets: The Need for Micro Market Metrics in Lending and Loss Mitigation," suggest that bank-generated appraisals, broker price opinions (BPOs) and automated valuation models are all deficient tools to establish today's price.
Realtors know that the best way to establish a semblance of value for these properties is to list them on the MLS. Yet more than 60 percent of all distressed properties never go there. Homeowners in trouble are loath to announce they need to sell; banks rarely advise them what to do. Such sites as ForeclosureS.com and RealtyTrac.com, are excellent for real-estate sleuths who appreciate a challenge and have the time to track down lawyers and lenders. But only when a property is introduced to a competitive marketplace like the MLS -- and priced right -- will real value be revealed and a deal consummated.
What Realtors do every day is price homes in their local markets. Why are banks loathe to get them involved from square one in the pricing process, the here and now of selling a house? Instead, we're powerless emissaries for our clients. So it's not surprising that despite a profusion of online seminars and convention courses, a recent survey found nearly 75 percent of the nation’s Realtors were fed up trying to do bank-approved deals. “How much time do you want to waste?” asked one blogging Realtor. He was talking not just about agents, but clients, too. If you’re on a timetable to move, making an offer on one of these properties is tantamount to throwing yourself into a black hole.
Another agent who still has a sense of humor, offered a SNL-flavored take on the problem: "Short sales are neither short nor sales," he wrote. He went on to say many of them are tantamount to “fake listings,” because once lenders see the paltry offers, they just don’t act on them – or even bother to tell those involved that they’ve put the file at the bottom of the pile. Less than 5 percent of the short sales in his community, he reported, had actually sold! I can't imagine it's much better here in Essex County, NJ. Despite daily cozying up to various faceless negotiators around the country, we're batting about .250 with our beleaguered short sales and foreclosure activity.
And so it goes. We make our calls. Our friendly negotiators call us "Honey." If they weren't in Florida or Utah, we'd invite them over for dinner, we know them so well. So it makes us a little crazy when we see full-page ads in newspapers-- like Bank of America's today -- with the headline "We're working to help people stay in their homes, not just buy them." This graceless pitch goes on to say that the bank has modified "over $100 billion in mortgages to keep up to 630,000 borrowers in their homes." And "for those who are ready to buy, we're taking steps to make sure people are getting loans that enable them to be successful homeowners...which means no hidden fees, no surprises, and confidence in every borrow's ability to repay their mortgage," and so on: "We care as much about helping to keep customers in their homes as we do in helping to get them there. If they don't succeed, neither do we." The punchline? "This is America. We keep moving forward."
Really, guys, in these dark days, will invoking the great spirit of America really change what has been wrought in the name of home ownership? I don't think so.
