Short sales continue to a be a problem for all parties and unresponsiveness and delays on the part of lenders continue to be the biggest beef REALTORS® have about the process, according to a survey.
The Short Sale Lender Satisfaction Survey conducted in December 2010 by the California Association of REALTORS® (C.A.R.) found fewer than three of five short sales close in California. The survey gauges REALTORS®' experiences in working with short sales transactions.
A short sale is a transaction in which the lender or lenders agree to accept less than the mortgage amount owed by the current homeowner. The fact that California has one of the highest number of distressed sales in the country and has a very low number of short sales closing illustrates the complexity and difficulty of navigating the short sale procedures, according to C.A.R.
"It's disappointing that less than three in five short sales close, despite every effort by the REALTOR®, home seller and potential home buyer," said C.A.R. President Beth L. Peerce. "Many underwater homeowners who have been hit by the recent economic crisis can no longer afford to stay in their home and just need to sell their home as expeditiously as possible are unable to largely because of the complex and cumbersome short sale process."
C.A.R.'s Short Sale Lender Satisfaction Survey was conducted during the last two weeks of December 2010 to gauge REALTORS®' experience in working with lenders or servicers of short sales, bank-owned properties (REOs), and foreclosures. The survey was delivered to 20,000 REALTORS®, with 2,150 responding to the survey. Of the REALTORS® surveyed, 94 percent participated in a short sale transaction during 2010.
REALTORS® cited the most frequent problems they encountered working with lenders and servicers during the short sale process include unresponsiveness, onerous procedures, and long processing delays. Nearly three-fourths (70 percent) of REALTORS® said closing their most recent short sale transaction with a lender or servicer was "difficult" or "extremely difficult," while only 10 percent said it was "easy" or "extremely easy."
"The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process," said Peerce. "Instead we're hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds six months."
More than half (63 percent) of REALTORS® said that lenders took more than 60 days to return a written response of the approval or disapproval of the short sale agreement submitted; 4 percent said they received a written response in less than 14 days; 44 percent of REALTORS® said that lenders took more than five business days to return any form of communication to REALTORS®; and only 14 percent said lenders responded "within one business day."
"It is clear that short sales are going to be part of California's real estate landscape for a few more years. We need to improve on the process so we can have smoother, quicker transactions, so distressed families can avoid foreclosure, salvage what they have and move on with their lives. The length of time and uncertainty are affecting families on both sides – buyers, as well as sellers," said Gene Lentz, president of the Silicon Valley Association of REALTORS®.
Further illustrating the frustration REALTORS® are having with lenders, the survey revealed nearly three-fourths (74 percent) of REALTORS® were "not satisfied" or "not at all satisfied" with the amount of time it took to hear whether a transaction was approved or disapproved, while 16 percent said they were "satisfied" or "extremely satisfied." In overall satisfaction with the lender they worked with, 67 percent of REALTORS® were "not satisfied" or "not at all satisfied," while 19 percent were "satisfied" or "extremely satisfied."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.