Short-Sales Are Now Taking Even Longer to Negotiate

Yesterday, I spoke with with someone who works at a company that specializes in negotiating short-sales - they told me that the time it takes to negotiate a short-sale has increased dramatically over the past 60 days.

The company she works for has about 100 full-time negotiators on staff. All of them have seen their case files go from 30 or 40 to over 100. This is in part to the rise in short-sales, but it's also due to the banks taking longer to process the short-sales on their end. This holds up the entire process and is a vicious cycle. (It's like trying to get your inbox to zero, but receiving new emails faster than you can hit "delete")

In addition, and more importantly, the loss mitigation officers at the banks are getting overwhelmed. In an effort to keep up with the rise in short-sales, many banks, such as Countrywide, are re-hiring people that they previously laid off from other divisions and putting them in loss mitigation (to negotiate short-sales). Not only are these hires new to loss mitigation, they're getting thrown into the job without any real training. That's not a good combination.

The person I spoke with also said they've been seeing this trend - increased short-sales and not enough (good) help - really picking up over the past two months They also said that it's getting worse by the day.

One could argue that this is an isolated incident - it's only this one person, this one company and only Countrywide. But I've seen short-sales taking longer as well and other agents who work with short-sales are seeing it too.

For example, an offer I submitted on behalf of my buyer was accepted by the seller (borrower) mid-February. A negotiator wasn't assigned to the case until just yesterday and the bank told the negotiator to "take a number" and that they "would get to it when they got to it". That translates to "it'll take longer than it usually does". Most likely, that means that it will take well over the 90 day average.

Yes, short-sales can be great deals and, with real estate inventory way down, they may be some of your only choices. Just remember that you must have lots of time on your hands and plenty of patience when dealing with short-sales - especially as of late.

Related Articles

"The Type of Property You Can Buy May Depend On The Time You Have"

New Bank of America Rules for Short-Sale Negotiations

If you're trying to negotiate a short-sale with Bank of America, you may be in for a rude awakening. According to a post by Dameon Russell of Century 21 Landmark Group in California, Bank of America has tightened up their policies regarding short-sales, specifically with their junior liens (2nd+ trusts).

Bank of America stated that short-pay offers for release of lien are to be declined unless the offer is equal to or greater 10 percent of the oustanding balance. And this is only the starting point/minimum - the amount may be greater in some situations.

In addition, the "offer" has to be cash and it's due at closing. No promissory notes in lieu of cash or dividing the sum into some cash and a promissory note.

In addition (excerpt from Dameon Russell's post):

They [Bank of America] now clearly state that they fully intend to pursue the balance anyway.  Important also to note that the 10% figure is not automatic, meaning this is a MINIMUM starting point.  They are now also requiring the verbiage on the HUD, line # 505, to not include the word "settlement"; it must say offer.

Apparently, using the word "settlement" potentially curtails their ability to pursue the balance of the debt in the future.  Whereas, if an offer of 10% is accepted by them, they want to be absolutely certain it is understood that the remaining balance is NOT forgiveable and that they reserve all available recourse to collect that debt from your client after C.O.E.

IF, the cash offer to BofA for release of lien is equal to or greater than 85%, they will consider that a "settlement" and the balance forgiveable.

Note that this policy is retroactive to July 1 so if you have a short-sale negotiation currently going on with Bank of America with a junior lien involved, you will be affected. Check with your agent and/or loss mitigation contact at Bank of America for more information.