Sellers, Buyers and Realtors Face Frustrations of Short Sales

RIO GRANDE — Short sales, which have taken off in the past year, have become a way out for some homeowners in trouble with their mortgage. But just as the concept is gaining favor, it is already running into problems.
The sales of homes for less than the amount owed the bank, known as short sales, have been widely viewed as an alternative that could help slow the foreclosure epidemic. In part due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing.
Debbie Colubiale, an associate-broker and senior Real Estate specialist with Apex Realty, told the Herald that as of Aug. 20 the number of properties that are subject to third party approval, meaning they are short sales or bank owned, in this county in the Multiple Listing Service:
• 128 single-family homes are subject to third party approval
• 21 single-family homes are currently under contract
• 61 single-family homes that were subject to third party approval have sold since the be-ginning of the year.
• 14 multi-family homes are subject to third party approval
• 2 multi-family homes are currently under contract
• 8 multi-family homes that were subject to third party approval have sold since the beginning of the year.
• 309 condos are subject to third party approval
• 37 condos are currently under contract
• 124 homes that were subject to third party approval have sold since the beginning of the year.
Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses. That means, delinquent homeowners escape a mortgage they cannot afford, and lenders, although taking a loss, avoid the even costlier process of completing a foreclosure.
But instead of new homeowners getting a good deal on the house of their dreams, many homeowners are watching potential buyers walk away as months pass while they deal with lenders’ lengthy delays, lost documents and unreturned calls, according to the National Association of Realtors (NAR).
A survey of 3,000 real estate agents conducted by market research firm Campbell Communications said nearly one third of short sales never make it to closing. Agents interviewed for the survey said mortgage servicers take an average of 4.5 weeks to provide answers on short-sale contracts. As a result, scores of potential buyers are walking away.
Real estate industry experts say banks are becoming more reluctant to agree to short sales, in part because the change in mark-to-market accounting rules gives them less incentive to take less than the mortgage is worth. As a result, they say, banks are holding out for what Realtors say are unrealistic offers.
Other delays stem from agents who fail to prepare buyers and sellers for the length of time it takes to get a short sale approved or who supply incomplete information to banks.