There’s always something to howl about.

We Have Not Seen The Bottom, Yet!

Watching How Lenders Deal With Short Sales

When lenders start to deal with foreclosures and pre-foreclosures in a manner consistent with reality, we might see the bottom of this market. Recently, my experience with these lenders has been less than heartening.

In one case, I represent a seller who paid waaaay too much for her home, and a death in her family resulted in her inability to keep up the payments. The offers than we have received have all netted the second lien holder NO MONEY – so they will not allow the sale by releasing the lien.

Keep in mind that when the house hits the courthouse steps – the second lien holder will get NOTHING, anyway. But, instead of helping facilitate the sale – they block it.

When I brought them an offer, the second lien holder sent me their list of requirements (which included some very detailed info that took a great deal of time to acquire) and told me that they will need at least 21 days to consider the offer. Don’t even bother us before 21 days, is what the instructions read.

Well we waited over a month for them, then called to find out where we were on this deal… only to be told, “Well, we’re not going to accept NOTHING, that’s for sure!”

Hmm – they knew there was nothing in it for them from the inception. They knew there was nothing in it by the detailed Seller’s Net Sheet that I submitted to them. So after more than a month – we now know that they will not accept such an offer.

Gee – I guess it was too much trouble to just say that in the beginning.

The second lien holder wants the first lien holder to give them some money, or they won’t release the lien. The first lien holder, of course, will not give the second lien holder anything.

I guess we should just go get our sign and lockbox…

I have another client who has been trying to sell for the last year and a half. They no longer live in the property (it’s been vacant for a year and a half). They have tried to talk to their lender(s) regarding a potential short sale so that we could lower the price down to a level that the market can allow a sale.

They are getting nowhere with their lenders. Apparently, they are not at all concerned that my clients may not be able to continue to pay for their “dead horse”.

My Experience Has Not Been Unique

Several other brokers I have spoken to are getting the same kind of treatment from the lenders. It’s as if they are in denial of the mess we’re all in. Some properties are being held as REO properties for more than a year before the lenders are getting wise to pricing them to move.

Meanwhile, many of these vacant properties are growing mold (sometimes toxic mold) and deteriorating day by day. The cost of holding these properties is enormous. Banks have to either self-insure these properties, or pay exorbitant rates to maintain policies on them.

At the same time, it seems that these same lenders are severely understaffed – which makes getting anything done that much more difficult.

I recently represented the buyer of a foreclosed property – and it was a hassle. We could have closed the deal in two weeks… but it took over three months. Everything that we did was slow as molasses.

So as far as I’m concerned – we aren’t at the bottom, yet.

Are We At Least Getting Close To The Bottom?

If you ask me when the market is going to improve, my guess is that it won’t be until next Spring, at the earliest. The Fed easing up on the money supply, along with the lenders getting their collective act together, will help to turn this mess around… but don’t expect anything quick. I know I don’t.