Sunday, February 28, 2010

One step forward, two steps back

The brutally cold surf temp has climbed in the last couple of weeks but is still lingering in the mid to upper 50s. Pray for warming. Sea surface temp chart courtesy of Rutgers University Coastal Ocean Observation Lab.

The short sale process appears to be devolving. For one set of very patient buyers, seven months after writing the initial contract we finally made it to the closing table last week. And, this was with an experienced and skilled negotiator on the listing side. Even paragons of patience have their limits and another buyer withdrew a short sale offer this week after almost two years into the short sale quagmire. It's an interesting story.

I presented an offer for these prospective buyers on a short sale oceanfront condo in April of 2008. The listing agent worked with the lender, Countrywide, for eight months with no success and withdrew the listing. (We continued to look for other properties during this time.) Countrywide filed foreclosure notice on the condo in October 2008. The listing reappeared with another broker in February 2009 and I presented an offer from the same buyers in March. This time a law firm was handling the negotiations with the lender, so, we were hopeful for a better result. It was not to be and the buyers withdrew their offer this week, twenty two months after the initial offer. Meanwhile the past due assessments (over $20,000) and tax bill are mounting while the Countrywide short sale negotiators are, figuratively, rearranging the deck chairs on the Titanic.

Another short sale fell apart this week when the bank returned a "must-have" net higher than their year-ago number. This particular property was first listed in the MLS as a short sale in January 2009 for $119,000. After no showings for two months the price was dropped to $99,000 and an offer of $99,000 was received and submitted to the bank. Two and a half months later the bank returned with a price of $124,000. That buyer went away and the MLS price was raised to the approved price, $124,000. Five months later a bank representative called the listing office to ask what needed to be done to move the property. The listing broker suggested a price drop to put it back in line with the comps. Price was dropped to $99,000 but it received no action and, with the bank rep's blessing, the price was dropped again to $89,000. A full asking price offer was received and submitted with expectations of fast approval. Response was faster this time with the geniuses at Wachovia responding four weeks later with a must-have net of $117,000 which would mean a selling price of over $130,000 to pay off the back taxes and condo assessments.

Both of these cases will eventually be foreclosures. The accumulated past due condo fees in foreclosures will be limited to six months, hurting the associations and the neighbors and the banks will wind up accepting less than they were offered earlier for properties likely needing expensive repairs after sitting neglected for years. These three short sale experiences are not atypical and do reflect what a buyer or a seller in a short sale may encounter. All three of these sales had experienced negotiators on the sellers' side. Many short sales do close but a larger number (based on anecdotal evidence on the ground) never make it to the closing table, often for sheer incompetence on the lenders' part. I'm not encouraged that the short sale process will improve considering that the lenders have already had three years of heavy short sale volume to get their acts together and to figure out a process for mitigating their losses. Fail.

As I've encouraged in the past, if you choose to offer on a short sale, continue your search in the meantime. If the listing agent for a short sale doesn't have experience in the process, don't waste your time. Even with experienced negotiators, be prepared for a wait and frustration. Inefficiency reigns.

No you can't find nothing at all,
If there was nothing there all along.
___________Death Cab for Cutie