We’ve seen three trends since the “recovery” went into full swing the past 18-24 months, and short sales are still part of the landscape in Westchester and the surrounding area counties (Putnam, Fairfield CT, Dutchess, Rockland, and Orange).
- Some people who think they are upside down aren’t. We recently put a property under contract that was dealing with a reverse mortgage. The seller bought decades ago, some updating was needed, and she was afraid she had no equity. The home was worth almost 50% more than she thought it was. Transaction gap, the phenomenon where it has been so long since a sale or purchase that the consumer isn’t current on the 2017 market, is a thing. Happily, in this case, all appears to be well.
- Lenders still aren’t efficient. It shouldn’t take 6 months or more (sometimes much, much more) to promulgate a short sale closing, but we are still looking at 4-5 months being almost lightning quick in this silo of the industry. Sometimes it is unavoidable, as loans get sold and the hour glass starts at zero. Often, however, the bank simply stinks- I can think of two properties within a mile of my home that have been in short sale purgatory for more than 5 years. That is appalling. It is bad for the borrower, the lender has a non-performing asset, and the local market suffers. I don’t see this changing. Moreover, some banks
- Moving incentives are still available on a limited basis. Sellers typically realize no proceeds from the closing of a short sale because of the math. The bank absorbs the loss, so there is no equity to distribute at the closing. However, some government programs such as HAFA are still in effect with a $3,000 credit toward moving, and the lenders themselves still have an occasional incentive. Taking a page from the “everything is negotiable” book, one of our agents does well at negotiating a moving allowance on behalf of the seller client when no program is offered. That is good advocacy.
The percentage of distress sales is considerably lower (thank God) than it was 5-7 years ago when the market was still hoping to recover, but short sales are still a factor. I remain bullish that they are a superior way of dispensing with non-performing mortgages for both lenders and borrowers; I wish lenders would devote better resources toward that end.
