Frank Walsh, Home Buyer in Strasburg, VA

why wouldnt a bank want to get rid of a non producing asset such as a short sale in timely manner?

Asked by Frank Walsh, Strasburg, VA Tue Feb 21, 2012

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Banks march to their own tune and while your "why" question is valid many variables are at work. If the bank has an asset on their books and it has not been put on the market (1) they do not yet own it (2) no REO agent has been selected to list it (3) it may need some work to get it ready to market (4) broker price opinions are incomplete or inconsistent (5) their internal forecast numbers to sell and timing to sell have yet to be determined (5) the asset may not be as desirable to sell as others they may have on the books and (6) who really knows " why?"

Banks are not required to be transparent with the consumer when it comes to selling their Assests.
0 votes Thank Flag Link Sun Feb 26, 2012
A-Not all short sale sellers are delinquent.
B-Often it is an HR/Organizational issue as others have mentioned.
But, generally, speaking, they are moving pretty quickly these days. I just closed one that was a nightmare (because of my sellers mostly), and it took 7 weeks for the first approval - that's two banks and sellers that could have responded in a more timely manner. That's not bad.
0 votes Thank Flag Link Tue Feb 21, 2012
Hi Frank,

Unfortunately, as a short sale listing agent, who has dealt with good contracts being declined, or the loan committee decision to be drawn out, there are many factors that are involved in a loan committee accepting the short sale. Much of it is driven by the investor who holds the loan, they are usually the decision maker and dictate as to the % of loss. There is also such a huge amount of back log that many asset managers are facing, they are not staffed to handle the incredible amount of paperwork involved to complete the transaction.

However, banks have made huge leaps in the processing and the handling of a short sale compared to a few years ago. I recommend to make sure your listing agent is knowledgeable in the short sale process and has a good track record of closing them. It's also very important the the buyer's agent is also knowledable about the short sale process and communication is the key!

For additional information on short sales, please visit my website dedicated to informing owners of their options to avoid foreclosure and the short sale process.
0 votes Thank Flag Link Tue Feb 21, 2012
Frank,
I am with you, most people with common ordinary sence would think the same thing. People out there think that they can get a tremendous deal with a short sale, I for one try to lead people away from them. Now we can get a deal sometimes with a forclosure...... a house that has gone past the short sale process and is now in forclosure. I have had success with forclosures, however I would encourage you to look at my site for access to not only the forclosures BUT also every home that is currently on the market in the entire tidewater area. That important site is http://WWW.RONCLARK.US and my personal cell number is 757 754 8498
0 votes Thank Flag Link Tue Feb 21, 2012
You already have some great answers and the banks are noving quicker on them, but it was a process of getting the staff trained, make sure they are within compliance of Federal laws and state laws, they have had to work on stream lining their process and many other factors.
I hope you are able to work through it and in the end get to closing. Good Luck.
0 votes Thank Flag Link Tue Feb 21, 2012
Frank,

It's not that they don't want to get rid of it, but there are a ton of procedures and paperwork that must be completed. Some listing agents do not get the initial paperwork done until they get an offer on the property which greatly delays the process. I feel that the main problem is that there are no set procedures in place for agents to follow when listing a short sale property. Each bank has different procedures which make it even harder for us. If and agent has sold a few short sale properties, then it does get easier, but it is truly a rough process. The seller has to show a definite hardship to be able to sucessfully sale their property short of what is owed. The seller can slow down the process if they do not get their paperwork back to the bank in a timely fashion and there is paperwork that is continually flowing from the mortgage company/bank to the seller and back and forth. You truly just have to be patient when buying a short sale or set a time frame that is acceptable and if the property does not close in your timeframe...move on. There are so many properties available, so you can find something else. If you really want that property, you will wait until you finally get the approval from the bank. Just be prepared for the bank to possibly ask you to raise your offer as it normally happens.

Good luck! I hope you are able to aquire the property that you want.
0 votes Thank Flag Link Tue Feb 21, 2012
A whole bunch of reasons. (I know. It doesn't seem to make sense. I sympathize.) Among them:

Some banks are just overwhelmed with paperwork. I really suspect that's less of an explanation than many people believe. But in some cases, they just can't process the paperwork quickly enough.

Banks sometimes believe (sometimes correctly) that property values will rise, and so the sales price may rise. For example, you may be looking at a property priced at (and with a fair market value of) $100,000 today. Well, the bank may figure that values are rising and that in 6 months that property will be worth $110,000. That's a 10% increase in 6 months, or an annualized return of 20%. That's about 5 times as much as if the bank lent the money out as a mortgage.

Banks would have to record the loss on their books. I'm not an accountant, and the issue can get very complex. But let's say they sold the property a few years back for $200,000. If they approve a short sale of $100,000 and take a loss, that'll show a $100,000 loss. Maybe--for accounting or other reasons--they don't want to take that $100,000 loss today . . . or this year.

Maybe there's difficulty with the title or the loan. With all the robosignings and MERS, it can be very difficult to really figure out who owns or is owed what. Keep in mind, too, that many banks quickly sold off their loans. So Chase or Bank of America--who you might be dealing with--might only be the loan servicer.

Maybe they don't understand the local market. In the example above, the property is worth $100,000 in today's market. But the bank is thousands of miles away. They pay someone to do a BPO (broker's price opinion, like a quickie appraisal) and it comes back at $120,000. They believe the BPO and won't accept your offer of $100,000.

There are plenty of other reasons, too. But that may give you some insight on why a lender's behavior regarding short sales seems so illogical.

Hope that helps.
0 votes Thank Flag Link Tue Feb 21, 2012
Don Tepper, Real Estate Pro in Fairfax, VA
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Because they lose money on it when they do. Would you like to give up $100,000? I doubt it and a bank is no different. Often they will foreclose so they can take over the house, move out the ex owner who defaulted on payments and then decide what to do. Other banks like the short sale approach, but in either case there is a loss to the bank and no banks likes to lose money. Some owners try to short sale their house while still making payments and the bank just ignores those offers since they are being paid the mortgage each month. You, as a potential buyer, will have no idea if the owner is current or behind on payments and often the sellers listing agent won't know either. It happens and those situations drag on for months sometimes as the bank just ignores the offers. I feel listing agents should have bank approval to short sale a house before it is listed for sale, this would prevent owners from trying to short sale just because the house is worth less than when they bought it but still current on payments.
0 votes Thank Flag Link Tue Feb 21, 2012
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