Short sales — selling a home for less than the amount owed — used to be so rare that Greg Armstrong remembers the first one he ever did.
"It was about four years ago, and the bank had 20 people on the conference call so they could learn what was going on," said Armstrong, a Pasco County real estate broker for Coldwell Banker. "They had to learn and we had to learn."
Now, short sales are so common they make up a hefty part of Armstrong's business — and that of many other Tampa Bay real estate agents.
In Pinellas County, the number of active short-sale listings in November was 3,829, a 43 percent jump from a year earlier. They ranged from two-bedroom bungalows in iffy neighborhoods to waterfront mansions that once had seven-figure prices.
The increase was even more dramatic in Hillsborough and Pasco counties, where 3,160 homeowners were trying to sell for less than the mortgaged amount. That's six times as many as in November 2009.
Why the proliferation of short sales?
"There's just no equity in this market," said Clarence Hasenbeck, a ReMax agent in St. Petersburg.
From their peak in 2006, Tampa Bay area home values have dropped 46.3 percent. That has hurt all homeowners, but none more so than those who refinanced during the bubble or got loans with no money down. Now, unable to afford the payments because of divorce, job loss or other reasons, they're forced to put their property on the market at a terrible time for sellers.
Conversely, it's a great time for buyers. Apart from the attractive prices, short sale properties are generally in better condition than homes and condos that have been foreclosed on by the bank and are sitting vacant.
But even though many lenders have improved their procedures for handling short sales, the delays and aggravations remain great.
"If you're dealing with Bank of America, if you're dealing with Chase, it's going to take four to six months," said Nathan Bangs, a Keller Williams associate in Tampa. "It's going to take massive amounts of effort."
Among the first bay area agents to specialize in short sales, Bangs now gets 95 percent of his business from people like the woman who bought a South Tampa condo for $225,000 five years ago with nothing down.
She married and moved into her husband's place. Then he lost his job and their income shrank so much they struggled to carry two mortgages.
Early last year, a buyer offered $100,000 for the condo but the lender, Bank of America, turned it down. Six months later a contract came in for $85,000, but that, too, was rejected. So was a contract for $65,000 and, just recently, one for $60,000.
The condo is back on the market at $64,900 — the least amount the bank said it would take — but Bangs doubts it will bring that much.
"That's four prices that they've had the opportunity to accept for as much as $100,000 and now they're going to see a sale below $60,000," he predicts.
Other real estate agents tell similar horror stories of short sales that drag on and on. There's the New Port Richey home that sat on the market for 37 months before the bank finally accepted an offer. And the St. Petersburg house that had eight contracts fall through before it finally closed on the ninth.
A major reason for the hang-ups in short sales is that most loans made during the boom were packaged into securities and sold to investors. So it is the investor, not the bank, that has the final word.
"It's almost never the bank that's doing it," said Armstrong, the Pasco broker. "They make a deal with us, then send it to the investor, who either approves it or not."
With short sales on the rise, banks have taken steps to streamline the process. Chase now assigns one employee to handle negotiations from start to finish so the homeowner or his representative isn't bounced from person to person, as used to be the case.
As a result, the number of short sales has doubled to more than 83,000 nationwide, Chase says. (It had no breakdown for the Tampa Bay area.)
Meanwhile, Bank of America, Wells Fargo and GMAC have gone to an automated system, Equator, in which every step of the process is documented and viewable online.
The downside is "you're not speaking to anyone, so if you really were to negotiate back, you'd have a hard time," Bangs said. "It's wonderful to work with, but you're not getting human interaction."
Though real estate agents can pass information between seller and lender, only registered mortgage brokers and lawyers are allowed to negotiate with banks on the terms of a short sale. That's because the lender may require the seller to pay all or part of the "deficiency" between the sales price and the amount owed on the mortgage.
The seller might also be required to report the difference as taxable income.
"There are a lot of legal issues in a short sale that will directly affect the seller, so an attorney needs to be involved," said Jan Bruzas of Realty Executives in St. Petersburg.
Last year, her firm started a short sale department that includes a paralegal who works with a nearby law firm. The legal clout gives sellers more leverage in dealing with the bank and results in eight out of 10 short sales going through, Bruzas said.
Still, statistics suggest that a short sale is often a hard sell.
In the Tampa Bay area, short sales made up about a third of active listings in November, but accounted for only a fifth of closings.
"There are far more under contract than will ever sell," said Ann Guiberson, president of the Pinellas Realtor Organization. Many sellers get so tired of dealing with the lender and paying for a home severely underwater that they eventually let it go into foreclosure.
With the jobless rate still high, Guiberson predicts short sales will be a "substantial part" of the market for the next two years. Bangs, the Tampa agent, has a gloomier assessment.
During the boom, he notes, many buyers chose to make minimal payments on no-income, no-asset loans with the idea that they could refinance before the loan terms changed. Instead, they will be stuck with those loans — and much higher payments.
"If they could barely keep up with $600, now it's a fixed-rate loan with interest and principal and the new payment is going to be $2,000," Bangs said. "That's what's coming next, and if you thought the subprime market between 2006 and 2008 was ugly, wait till you see what's going to take place between 2011 and 2013."
Susan Taylor Martin can be reached at firstname.lastname@example.org.