Thirty days have passed since I took a snapshot of the pendings. The one-month-later status of those pendings is shown below. It comes as no surprise that short sales have the lowest percentage of closings (13%). This is due to the unusually long time required for the lenders to make a decision whether to accept or reject a pending offer. Furthermore, the short sales have the highest percentage of withdrawn or expired listings, as well as listings placed back on the market. Again this is due to the long period of processing time causing prospective Buyers to lose patience and move on to pursue other properties.
The next least-likely category of Pendings to close are those with a home sale contingency (29%). Again, no surprise here.
| "Pending" Status | # | % | closed 30 days later | back on market (active) | still pending | with-drawn or expired |
| Active/Pending-Call | 97 | 12.5 | 52% | 7% | 38% | 3% |
| Active/Pending-Loan | 307 | 39.5 | 58% | 6% | 33% | 3% |
| Active/Pending-House | 17 | 2.2 | 29% | 6% | 65% | n/a |
| Active/Pending-Short Sale | 199 | 25.6 | 13% | 17% | 60% | 9% |
| Pending – No Show | 158 | 20.0 | 42% | 7% | 50% | 1% |
| total | 787 | 99.8 |
Despite the long odds of a short sale situation closing, these types of sales remain popular among Buyers (31% pending – see below). This is due to the perception of "getting a deal" with these types of sales. For the same reason bank-owned properties are also popular (37% pending) with buyers.
| "Special Condition of Sale" | # | % |
closed 30 days later |
pending 30 days later |
| Bank Owned | 409 | 9.5 | 18% | 37% |
| Relocation | 20 | 0.5 | 1% | 20% |
| Short Sale | 503 | 11.7 | 4% | 31% |
| Subject to Court Approval | 24 | 0.6 | 2% | 2% |
| Other | 273 | 6.3 | 13% | 26% |
| None | 2,869 | 66.6 | 5% | 14% |
| Not yet specified | 207 | 4.8 | 1% | 5% |
| total | 4,305 | 100.0 |
I will update these tables again in another thirty days.
Phil
Interesting, the banks seem to have an idea how to sell in this market. I guess not being emotionally attached gives them an advantage. I can only imagine the losses they are seeing.
The 409 number seems a bit low for bank owned properties, but I have nothing to base my feeling on except the doom and gloom talk of all the foreclosures.
Interesting article in RGJ about the increase of sales. But when you read the article it seems it is just a seasonal adjustment as the inventory is still increasing. Headlines like that are just bait, and I pity the poor fool who only reads headlines.
Mark
I just put an offer in for a short sale property in Fernley. I am a first time home buyer and have time on my side. I guess this will be a test of patience for me. My agent initially gave the bank one month to respond to the offer. We’ll see what my odds are. Supposedly the seller has been in contact with the bank up until the offer was put in, so I am keeping my fingers crossed.
Dave
I’ve tracked a short sale in Spanish Springs for the last few months, although the owner said it was sold, I just got an email that it’s on the market again.
First buyer waited a month for approval of the bank, then bailed, bought another home. Second buyer waited another 9 weeks, then bailed. Seems more efficient if the bank could establish a sales price going in, rather than waiting to decide once an offer is on the table. Maybe the delay means the bank continues to get payments from the hapless seller, thereby delaying booking a loss.
NAS
Dave-
I think you are exactly correct with the bank delays due to the bank collecting some form of payment from the seller. The incentive to dump the house is less urgent for them. At present, consider most of them a waste of time.
Doug B. Cooper
Has anyone seen the latest Housing Sales 1st Quarter 2008 provided by the Center For Regional Studies at UNR?? I have and the numbers are mind boggling!! The source data is all taken from the Washoe County Assessor, meaning it’s exceptionally credible info. Talk about reality.
Phil
Ok Doug give us a jist of the data at least!
What a tease!
Tom
We work with bank real estate departments constantly. They are presently dealing with a looming REO problem the likes of which the people presently in those jobs have never seen before.
I believe the reason the banks wait on the shorts is to lock up a low-end deal for a while, so they can document the file with efforts to shop for a better price. Meanwhile, they probably aren’t collecting payments, borrowers in that situation typically are close to running on Notice time and many have stopped paying. But they are in the house, providing some sort of presence which deters vandalism and all the things that happen to an empty house. They may even be watering the landscaping, if the lender can persuade them into doing so on some sort of temporary forbearance arrangement. The banks don’t want to take the property into management, but they do wring their hands and agonize over short sales and they cannot get committee approval without showing due diligence to try for a higher price. Bank officers are skittish to start with, and no one at a bank right now wants to be the guy who says “Take the Deal.” It is better to fully document the file with due diligence even if the loss is ongoing for a while, rather than be the guy who gets the critiques for the hard calls. Understanding their thought process requires knowing the central mentality of middle management at banks today: Avoid Criticism At All Costs. The day of your local branch manager who had significant desk authority, made all decisions, knew you and your needs, and took care of things, is over. We have committees of thirty-year old MBAs in cubicles making decision, and only in their own team’s sphere of influence. This means there is no mid-fifties branch manager who appreciates all the new business referrals from a particular customer, who makes decisions maybe with just one phone call. Now we have committees of strangers looking at policy memos. The structure of banking today is not prepared to handle this crisis. It is going to take some time to straighten this out.
Sully
So, the same people at the bank that got them into the mess in the first place, cannot decide if or when they want to get them out of it?
Phil
I went to a HOA meeting where it received over 17K in fines, and although they didnt break it down to specifics, they made a point that vacant houses are being fined for lack of maintenance. They even are thinking about dropping the monthly HOA fees as the bank balance is growing.
I still would rather have people living there….
Tom
Sully, it is stricly a function-oriented mindset at mid-level management at the banks now.
The fund managers and Investment Advisory Teams were attracted to these new things called bundled mortgage-backed securities, which were pitched them by the brokerage firm geniuses who created such a thing, and they looked snappy; so the IA teams bought in. Then comes the real estate credit crunch and suddenly those investments don’t look so good.
But the people who are stuck with the mess when those “securities” blow up like overpacked suitcases are the real estate management departments–different folks at the bank. And in some cases they still haven’t figured out for sure who is going to own which individual mortgages comprising those packages, due to the fractionalization of interests. It can be determined, but it is a large amount of data to mine through and separate.
There is going to be even more consequences of this debacle. Many cash management funds and money market funds contain mid-term debt of financial institutions holding these bundled mortgage assets, which have yet to be restated in terms of their actual values. When that happens, which it will, the assets of those insitutions will take a haircut, along with their credit ratings, and the dollar value of the money market funds holding their obligations could see a drop. Suddenly those “safe” cash equivalent funds instead of being worth their customary $1.00 per unit might be worth 90 cents. It is a growing concern in some circles.
I don’t think the politicians realize how deep this runs in our economy. Or maybe they would just rather talk about whatever silly things they are accusing each other of at the moment.
Doug B. Cooper
Phil, you have to pay for report, but you can get it here if you’re interested. Good stuff!
http://www.nsbdc.org/what/data_statistics/gis/
smarten
Tom –
I’ve experienced the same financial institution mindless mindset insofar as unfractionalized portfolio owned mortgages in default [soon to become REOs] are concerned.
I’ve written to Diane about this but now seems as good as any to introduce it to the group. I’ve come across an interesting SFR here in Incline Village that’s in foreclosure. There’s a $800K [portfolio owned] first with Wachovia, and a $340K second with a tier B regional Northern California bank. Both are seriously in default.
The second was scheduled to go to foreclosure sale today, and the first was scheduled for the same fate on June 4. But the owner filed Chapter XI BK last week to stop both.
The owner has been attempting to sell the property for the last three months. Originally started out at a $1.35M price tag – now down to $1.15M. The problem? It’s still overpriced and even if someone came in with a full price offer, there wouldn’t be enough to cover both of the mortgages, closing costs and the broker’s commission.
Sure I could come in with a short sale offer [if the owner were inclined to participate (which he isn’t for other reasons)]. But I’d rather control the paper against this property.
So I contact the second’s attorney who sees the realities of the situation and is willing to compromise his bank’s position [either on a short sale or deed of trust assignment].
I contact Wachovia, and it’s like I’m talking to the man on the moon. First of all, they can’t talk to me even though I want to purchase their mortgage. According to them, this portfolio owned security can’t be hypothecated without the mortgagor’s consent [which we both know is not true].
Second, now that there’s a bankruptcy, they’re not going to talk to anyone until the bankruptcy stay is lifted. Could I bring this about? Sure. But I’m not going to solve Wachovia’s problem unless there’s light at the end of the tunnel.
Third, Wachovia has policies and procedures. Now mind you – I’m speaking to Wachovia’s asset management department, and the person who has been assigned to oversee this problem loan. Policies and procedures means Wachovia wants to see:
1. A bona fide offer;
2. Written evidence the holder of the second has agreed to discount its mortgage [as well as the details of that discount];
3. A $575 appraisal for the property which demonstrates it’s worth less than its first mortgage [which it isn’t];
4. A bankruptcy order which has lifted the stay against foreclosure;
5. A hardship letter from the seller which makes the case why Wachovia should discount the amount owed;
6. I’m sure there’s more – I stopped counting after the latter.
Then Wachovia proposes sitting on the request for a good 60-90 days while it decides whether or not to buy into the program while we all sit around and twittle our thumbs.
I could have had all the problems resolved yesterday. But instead, this property’s going to be tied up in the courts for at least 6 months and we won’t be seeing it come back on as a foreclosure sale for another 9 months or so. By then I as a buyer will be gone, and there will be another $150K or more owed to banks, attorneys, county tax collectors, etc. And then as a REO, there will be more out of pocket costs; listing fees; real estate commissions; all to talk to someone like me who’s going to offer less than today’s offer.
Quite frankly I have no sympathy for these people. They deserve what they’re going to get and by my calculations, it should be a whole lot less than 75% of the principal amount owed at the time of foreclosure.
That’s why I’ve come to the conclusion it’s a complete waste of time to even start down the road of a short sale with any financial institution.
Phil
smarten,
Out of curiousity and forgive me if I am out of bounds here, but were you trying to buy this property to live in?
I have to think of all the bad loans the banks are looking at. You just have to look at all the half developed land here in Reno to know that there are big problems ahead. You have to think the cost to carry this partially built land (sewers, streets, ….) has got to be eating into something more than 150K.
Do I feel sorry for these people? Nope, but I have to think of the effect of the contractors, agents, and other people who have lost thier jobs. I was going through my final inspection on my house when I saw 3 different people as the contractor’s kept getting laid off. The fact is jobs where fueled by the boom.
Look at Kiely Ranch and the empty fields, now having nature reclaim some of the dirt. Or take a look at a house near me which starting being built before winter and was left to rot! Yes the builder is starting to work on it again, but think of buying a home which was half built open all winter to the elements. How would you like to be next door?
Will Reno become a modern day ghost town? I don’t think so. And then you look at some builder trying to get Reno to annex some land out in Winamucca Ranch road. Pure craziness is out there and our politicians are clueless. Water, schools, roads, police, fire, hospitals, so many issues to solve. Sorry if I am bringing this up again and am boring people.
So a bank losing 150K on a property! Simply a drop in the bucket.
smarten
Yes Phil. The property was intended to be owner-occupied. I don’t think it would be worth the effort otherwise unless the property were worth a whole lot more than the outstanding liens against it. But then, it probably would have sold.
Michael Spickes
Hello All,
There has been some great debate and discussion around this topic, especially west of the Mountain Time Zone. If you’ll remember, America’s Home Rescue, a team of real estate agents, came through the Reno area about 2 months ago and within 4 days, Dickson Realty, Keller Williams, and a few other brokerages were requiring all their agents to come to their training courses on Short Sales. Since then, the general moral of agents has shifted with a greater level of confidence and strategic know-how while working their Short Sale listings, and as Buyers Agents on Short Sale listings.
My name is Michael Spickes and my wife and I own America’s Home Rescue. It has been such a privilege having been on the road in the Western United States training real estate agents and giving them substantive Short Sale nuts-n-bolts education that they can take the moment they leave our class and apply directly to their transactions. We believe that training the agents is only half the battle. What about the banks and all their issues? In the past few weeks, our company had the privilege of meeting with the US Treasury’s Chief of Staff and Senior Policy Advisor to Domestic Finance to discuss the issues Agent’s are having with banks in Short Sales, especially the 2nd mortgage lien holders and/or service providers.
We are excited to announce that, at the request of many brokerages in Reno and First American Title, we are coming back to Reno in the next few weeks. We are inviting every one of you to take part in our seminars and to discuss the exciting new detains of where Short Sales are going and how Real Estate Agents will increasingly become a key player in the future role of assisting distressed homeowners through a difficult season in their lives. The seminar schedule is now posted at http://www.ShortSaleSolutions.biz. We look forward to seeing all of you there.
Michael Spickes
America’s Home Rescue