Short Sale house becoming a foreclosure?

Asked by Jon Olson, San Diego, CA Fri Feb 13, 2009

I am curious how long here in San Diego county does a Short Sale home generally stay on the market before a bank forecloses and it becomes an REO. How many factors are involved and what kind of timeframe can you expect to see a short sale come back as an REO.

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Bonnie Malon…, Agent, San Diego, CA
Thu Mar 19, 2009
the true answer is...none of us have the answer as there does not seem to be a uniform procedure used by the banks. I have seen some short sales stay on the market for months, without a negotiator assigned to it, and with homeowners living mortgage free.Currently there are more short sales than foreclosures because we are in the middle of a 90 moritorium on foreclosing. If a home is listed for sale as a short sale and the bank sees activity, it will typically postpone trustee sales in hope of closing a short sale. Keep in mind that foreclosing can cost 10's of thousands of dollars;so if the seller has an experienced listing agent, keeping in constant contact with the lender....the short sale listing can stay in effect for quite some time. If you are looking for foreclosures, I would stick to that search. Do not wait for a home to go to foreclosure as yo may miss out on it entirely.
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Keith Manson-…, , Milwaukee, WI
Sun May 2, 2010
A short sale can become a foreclosue quickly if the mortgagor just gives up and does not try to do a workout or defend their position against the bank. However with hamp and hafa things can change. There has been a push to see if anyone in foreclosure can qualify under a modification before completing the foreclosure. The foreclosure process is quick in californa so if the borrower waives its defenses the process can be over in 100-120 days.

It also depends on the banks and how they are processing properties in foreclosure. Certain banks are taking longer than others.

Keith Manson
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee
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Scott Schroe…, , Escondido, CA
Thu Apr 29, 2010
The short answer is that there is no short answer. I've seen them turn around in just a few weeks, and I've also seen it take several months. It will depend on the lender, their volume of REO business, and which direction the wind is blowing in Washington this week.
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Bonnie Malon…, Agent, San Diego, CA
Sat Mar 20, 2010
Unfortunately there is no definitive response to this question. some banks will move quicker than others and some will take longer. I hat to answer a question with a question but why would you wait for a house to go from short sale to foreclosure to purchase it? You will end up frustrated with no guaranty that you will even see the house once it goes to foreclosure as many REO specialists will presale their bank owned properties while they wait for a bank to approve a price and sign a listing contract. By the time the house is ready to go on the market the house could have a stack of offers and your chances will not be great.
If you are shopping for a home the best advise I can give you is to keep up with the active market and when you find a house put an offer on it and continue looking. Shorts sales can take over 6+ months to get lender approval but you have nothing to lose. Talk to your realtor, she/he knows what is out there and can direct you to the cream of the crop. Keep in mind that new short sale listings will take a loong time. My short sale advise is look at the homes taht have beeen on the market for a long time...200+ days. these homes probably have offers on them but after 200 days there is a good chance the buyers have walked and you can move into the deal with less down time.
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Edward Peckh…, , Vista, CA
Wed Jul 22, 2009
The time on the market for short sales largely depends on several factors. Remember that the bank wants to get as much money for the property as it can. So, an agent who is pro-active in keeping the bank aware of the market for the house he/she has listed will give the bank the information it needs to make that decision. Foreclosures cost the bank money but so do short sales. So the bank will wait until the points of value cross and it starts to lose money on the short sale before it makes the decision to go into a foreclosure. Any short sale requires the listing agent to make sure he/she is on the phone with the bank to keep the listing alive.

So, the real answer regarding time is very difficult to answer because all short sales are unique and so are the agents who list them.
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Susan Vander…, Agent, Lake Elsinore, CA
Thu May 28, 2009
I've seen homes go from short sale status to foreclosure within 6 months and sometimes longer. I hope that helps if you are interested in making offers. Some buyers do not have the patience to wait for the bank to approve their offers on the short sale.

If you are interested in short sale properties, you should look at properties that already have the short sale approved, otherwise, you would wait for the bank to foreclose (3-9 months, sometimes longer) and it becomes REO (another 3-9 months, sometimes longer) and then it gets listed by a broker and available to the open market unless it is sold off as part of a bundle.
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Diane Conaway, Agent, Escondido, CA
Fri Feb 13, 2009
Hi Jon,

You added a picture, I see. You always ask very good questions. Weren't you looking in Del Mar previously? I am seeing more and more short sales that actually are closing escrow, so if it's a house you really like, jump in there and make an offer. Banks are trying to move inventory off their books faster and have been staffing up over the last couple of months. Last summer, one took 5 months to get an approval to me and of course the buyer walked. They just filed an NOD after 6 months of no payments but I have a new replacement offer in too so they'll frequently postpone the trustee sale to let the short sale close. My new short sale with another lender just got approval in 45 days, so the timeframes are getting better. But, I've seen other houses that became bank owned that didn't even come on the market for many months. Some banks have so much inventory they can't get a handle on it and even get them listed for sale in a timely manner. Others assign them to a Realtor the minute the trustee sale is finalized. So, sorry we can't be more direct but there's not a definitive answer. Have you made offers in the last few months you've been on trulia? How can we help you find the home that's just right for you?

Diane Conaway, RE/MAX United, (760) 749-2888
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Bryan Devore, Agent, Carlsbad, CA
Fri Feb 13, 2009
Hi, Jon.

Birgit has laid it out well. There really is no rhyme or reason. The big banks just promised to hold off on foreclosing on homes until the next financial bailout is announced. Fannie Mae and Freddie Mac had already promised that. So, you may see short sales on the market a bit longer. It also depends upon how early in the process someone does a short sale. For example, we've had clients who weren't behind on their payments, did a short sell, and closed escrow, so it wasn't even close to becoming an REO. So, long story short, it all depends upon the property. You can visit our website to see all available foreclosures in San Diego County, and we can also search the tax rolls for Notices of Default so we know how soon they might be coming to foreclosure. Hope that helps! Bryan Devore, 760-908-3838
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Birgit Dugan, , San Diego County, CA
Fri Feb 13, 2009
Well....Jon, there is no simple answer and each house will be different. It will depend on the lender, whether the home is sold at the trustee's sale, how long it has been in default ect. The process is tedious and time consuming for most homes. Then I have gotten REO listings that people have come back to make offers on in a shorter time frame. Almost always never before 4-6 months. If you have you heart set on a house that is in default, listed as a short sale and you are waiting for it to become an REO, you may be setting yourself up for disappointment. You may try calling the lender direct, or the agent that has the house listed. Depending on the agent, you may find help. Hopefully this scenario will change in the near future. My sources tell me we have some positive changes coming in dealing with short sales. It should become easier at some point for all involved. Good luck! Feel free to call if you have any other questions. My buyers agent is also a short sale specialist. Have a good day... Birgit Anglin 760-815-4122
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