Realtor Bruce Harris recently sold a home in 42 days, from contract to closing. Not a bad timeline for a traditional sale. But considering this was a short sale, it's downright impressive. Harris and other Realtors say short sales are moving along much faster than a year ago and are no longer a drawn-out nightmare for buyers and sellers.
"They were taking five to six months or longer to close in 2010. It was more like 60 to 90 days by the second half of 2011," said Harris, an agent with the Harris Real Estate Team at Keller Williams. He has represented buyers or sellers in an average of 20 short sales a year since 2009. "I'll submit an offer to a bank and the seller gets stuff in the mail from them in two days. A year ago, you might get an answer in 30 days."
A short sale occurs when a bank takes less than what is owed on a home. Homeowners are forgiven some or all of the unpaid loan amount if they can prove they have had a hardship, such as the loss of a job or a divorce. Lenders have learned this is often better than waiting months to foreclose on a home that many times has been neglected and is in bad shape.
"It is a whole different world out there. I just had one with Wells Fargo and they called me (after submitting paperwork) before I could even call them," said Brooke Hefte, a Realtor with Re/Max Metro who has been involved in about 35 short sales in the last few years. "I listed a home in November and it closed in the beginning of January. They're still not easy or fun, and homes with second lenders and homeowners associations can still complicate things."
David Greenlees, with Coldwell Banker Residential Real Estate in St. Pete Beach, agrees that the process has vastly improved. "The first one I did a few years back took nine months and went through five buyers because they kept getting exhausted and canceled," he said, "but it's getting much better now. The banks are getting better at it, and our side of it has gotten more efficient."
Many banks have designated employees to deal with short sales so homeowners and their Realtors have a specific person to talk to instead of just sending reams of paper to an address and crossing their fingers.
"You're negotiating right from the start with the same person rather than calling a 1-800 number and getting a different person every time," Hefte said. This speeds up the bank's decision.
About a year ago Wells Fargo enhanced its system of processing short sales to make it easier for real estate agents to complete a transaction, bank spokesman Jim Hines said.
"Our field teams have also worked with broker agents in various markets to deliver training around short sales and have also teamed up with organizations such as Hope Now to educate consumers on short sales," he said. Hope Now is a nonprofit alliance of lenders and counselors that tries to work out solutions for struggling homeowners.
"With Equator you can email and upload documents as well as fill them out online. It definitely shortens the time frame," said David McKinnon of Weichert Realtors Sun Sand & Sea Homes in Madeira Beach.
Since Equator launched in 2009, more than a million short sales have been initiated on the site.
Another reason for faster turnaround times is that lenders have become more resigned to accepting a short sale.
Harris represented a seller in August who had managed to borrow money from friends and family and to stay current on her mortgage. But she had no more help and was struggling to pay her bills. She put the house on the market and missed her first payment in August. By Aug. 3 there was an offer on it, and five days after that the bank accepted the offer. It was sold in 50 days.
"That was one of the first ones that closed that quickly," Harris said. He and his wife, Tara, have become specialists in short sales and get most of their business from referrals from sellers.
"A lot of people won't take the person who has the $50,000 short sale, but we will," he said. "I sold one man's home and then he had me work with his son and his ex-wife on their short sales."
No longer a deal killer
Pinellas County had 1,581 short sales with an average price of $170,000 in 2010. Last year, there were 1,838 with an average price of $151,000.
Buyers are no longer ruling out looking at short sales.
"Our inventory is so low, people do not have the choice but to consider buying a short sale home," Tara Harris said.
"Almost all the buyers we're working with now are open to short sales," Hefte said. "They have to be because they dominate the market so much. The stigma of thinking they're going to have to wait a year (for a deal to close) is definitely going away."
But a big buyer misconception is that they can get a fire sale price on a short sale.
"There is a little bit of a discount for a short sale, but the banks are sticking pretty close to appraisals," Hefte said.
"If a Realtor prices it at $50,000 for a $100,000 house to get a lot of buyers interested, there is no way the bank is going to approve that price," Tara Harris said. "The banks are not going to let it go for nothing, just like they're not going to let a foreclosure go for nothing."
Katherine Snow Smith can be reached at firstname.lastname@example.org.