Short Sale Update

Haven’t posted in awhile.  We have been busy, actually growing the business in this market.  Most of the growth is coming in short sales (not an easy way to do it) and foreclosures (easy but a little disheartening).  We saw an interesting trend recently in that most of the banks we work with all hired large numbers of short sale negotiators.  This happened at the same time that the rumor was circulating that the banks want to slow down the foreclosure process so that “foreclosures” do not become a major election issue.  That’s great with us, but what happened next has been interesting.

The lenders in second position have increased the amount they will require in cases where they are due to be wiped out.  In other words, if a sale will generate only enough money to partially pay back the first loan and the second is due to get nothing, the second typically had been agreeing to accept $2k to process the paperwork.  Not anymore.  In one case, Countrywide insisted on receiving $8k.  This is understandable.  In cases where homes are selling for $400k – $800k, they are counting on the agents or sellers to chip in the extra $6k.  And, they only have to be right 1 out of 4 times to break even.  Plus, many sellers can dip into a credit card to cover the small amount if it means a short sale instead of a foreclosure.

The really surprising case was GMAC.  We had been negotiating a short sale since September and they were demanding 10%, or a little over $13k to settle.  The length of time it took to negotiate with the first lender and put the deal together caused us to have to sell the home 4 times!  Well, we finally got the deal approved by the first lender and all the brokers, giving GMAC their 10%.  That’s when GMAC bounced the negotiations to a different department (the first lien holder had an auction scheduled only 30 days away).  I should have realized that things were going to get interesting when the first negotiator in the new department insisted on being called “Mr. Trimble”.  Well, after Mr. Trimble lost several faxes (and the ability to answer his phone), we were assigned another negotiator (to rename nameless to protect the knucklehead – and hopefully our deal) who said that even though GMAC had commited to accepting 10%, if he didn’t get $40k, he was going to refuse the deal which would a) force a foreclosure and b) cost his company $13,700.  Now, I don’t mind someone negotiating hard, but when you negotiate and make a commitment that everyone else works to meet, getting you what you want (at the expense of 4 months of everyone else’s work) and then welch on your deal, that’s unethical and I told him so (along with a few choice f- bombs.)

Then he backpeddeled and said it was a “counter offer” and we should give him our counter.  I countered with $5k  -which he didn’t think was funny.  Eventually he came back and said his final position is $19k.  His reasoning is that the sellers (who divorced and moved out of state) are paying all their bills except the mortgage (makes sense to me since that is the one they can’t afford).  So, knucklehead with GMAC is willing to blow up a deal to make his company 15% on a loan the should not have issued instead of 10% which took 4 months to get them; all while trying to keep the foreclosure crises from being a major election issue.

I thought my 2 year old was challenging.

San Diego April Numbers – First Look

As of this writing, the sales results for San Diego County for the month of April are looking as strong as I expected.  Throughout the first quarter, sales were about 32% lower (number of homes sold) than during the same period in 2007.  However, in April, the numbers rose to be only 9% under 2007 figures.  More impressively, the number of homes in escrow rose from 3,852 a year ago to 5,222 at the end of April 2008.  Although these homes are not as sure to close as homes put in escrow last year due to mortgage tightening and short sale issues, this increase demonstrates that with the recent hard fall in the market, buyers are jumping back in.

As I reported in Monday Morning Coffee the last 2 weeks, a lot of the activity is occurring at the lower and higher price points.  In the lower price points, the market has taken a pretty big hit and first time buyers are entering to take advantage of the current conditions.  At the upper end, buyers still have money and are not dependent on risky loan products to make their purchases.  The important thing to watch is which way the middle goes.  For now, it looks like a strong summer may help support the middle market and absorb some of the foreclosure inventory that is coming through the system.