Realtors Set Short Sale Goals for Banks

The California Association of Realtors recently issued a news release painting a bleak picture for the future of the state’s housing market with the revelation that “Short sales will be a part of the California real estate landscape for years to come.” The association appeared to be turning away from its generally positive outlook when it sent letters to JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup, urging the large banks to implement better procedures for the handling of short sales.

Because the Realtors only get paid when a sale closes, they have the ultimate motivation to see the short sales approval process streamlined. The association’s requests of the banks included a host of elements designed to improve the overall short sales system. One request was that the banks provide and meet realistic time frames for offer evaluations; another was to provide borrowers with a complete list of the documentation needed in order to process each short sale. Of particular concern to the Realtors was that the banks stop canceling short sale requests already in process and not require the borrowers to start the whole procedure over again when only one or two documents in a package are missing or incomplete. Realistic time frames for offer evaluations would increase short sale processing speeds since many buyers get tired of waiting for bank responses that may take weeks or even months. The Realtors group also sought to increase the amount of money available to pay off secondary mortgages in a short sale because the secondary lenders can block a sale if the primary lenders don’t offer a realistic payoff up front.

California Association of Realtors President Beth L. Peerce said “We believe banks, investors, homeowners, and real estate professionals all have a common interest in conducting these transactions expeditiously and efficiently. The housing market recovery is in everyone’s best interests, and your urgent focus on these issues will help achieve that end. We are convinced that by correcting these items, your system will run more smoothly and, in the end, save everyone money and resources, as well as assist in the housing market recovery.”

According to the association, short sales benefit the many distressed sellers who have lost jobs or been forced to take employment at lower pay than when they purchased their homes. A short sale allows them to walk away from their debt without facing bankruptcy or foreclosure, and causes less damage to their credit ratings. The sellers also get to decide when and how they will move after a foreclosure, instead of facing eviction. The Realtors say short sales allow the banks to get the benefit of selling homes that are still occupied and cared for by their owners. Such houses will usually bring a higher price than homes that have been abandoned and neglected. Any extra money left over after the short sale goes to the bank, another factor that decreases their losses. The banks also save a few thousand dollars by not paying a trustee to complete a foreclosure. Short sales are also better for the rest of the neighborhood when one considers that the higher prices short sales bring do far less damage to surrounding home values than poorly maintained abandoned homes that are neglected by foreclosing banks might.