Suppose you are underwater on your mortgage, and can’t afford to make your house payments. You don’t want to walk away, and you don’t have the $100K+ over and above what your house is worth to bring to closing. You’ll probably want to try a short sale then, where you can sell a property for less than you owe with lender approval. What do you do though if you can’t close a short sale? This is a big problem in California, where a recent survey of California realtors showed that short sales aren’t closing 43% of the time. Here’s what the survey found: [Hat tip Freedom’s Phoenix.]
- Survey respondents say that 43 percent of all short sale deals that go under contract end up falling apart. Just 57 percent end up closing.
- Seventy percent of respondents characterized their most recent short sale as “difficult” or “extremely difficult,” while only 10 percent said it was “easy” or “extremely easy.”
- Forty-four percent said that lenders took more than five business days to return any form of communication to an agent, while 14 percent said lenders responded “within one business day.”
- Sixty-three percent said that lenders took more than 60 days to return a written response of the approval or disapproval of the short sale agreement submitted. Only 4 percent said they received a written response in less than 14 days.
- Sixty-four percent were “not satisfied” or “not at all satisfied” with the timeliness of lenders’ response to their inquiries. Only one in five were satisfied with response times.
Although the survey only covered agents in California, National Assn. of Realtors spokesman Walter Molony said similar complaints had come from across the country, especially from states with hard-hit housing markets such as Nevada, Florida and Arizona.
“Banks just have not been equipped or willing to make quick decisions on this,” Molony said. “It’s unfair to all parties concerned.”
When you consider how many homeowners are underwater, this is a big concern:
Nevada had an eye-popping 65% of all its mortgage properties underwater, followed by Arizona (51%), Florida (47 %), Michigan (36 %) and California (32 %).
To be fair, the high percentage of failed closings is not just the fault of the lenders:
Frances Hicks, an agent with Keller Williams Realty in Mission Viejo, said that agents add to the difficulties, either through inexperience in dealing with short sales or eagerness to close a deal. For example, she said, some agents allow their clients to enter several short sale purchase agreements at once to see which one will close sooner, then back out of the others.
The long and “short” of it? [Bad pun intended.] For underwater homeowners, there are options, but none of them, whether it be walking, modifying, or short selling, are easy.