Thursday, May 31, 2012

Best Lenders and Servicers to Buy Short Sales From May 24, 2012 By Daren Blomquist, RealtyTrac Vice President Text Size A A A This is article, spotlighting short sale trends in early 2012, seems to indicate that short sale volume is on the rise while short sale prices are trending lower — a good mix for prospective buyers and investors. This series is largely based on a short sale report issued by RealtyTrac for a special live broadcast hosted by the Charfen Institute on April 19. Among the nation’s largest lenders and mortgage servicers, some are better than others when it comes to buying a short sale. There are several ways to measure which lenders are best to buy short sales from: sales volume, average discount and average time to sell. We’ll look at the top performing lenders in each of these categories based on January 2012 foreclosure sales data. 1. Short Sale Volume & Trend When it comes to sheer volume of short sales, Bank of America is the clear leader, with more than 5,000 pre-foreclosure sales — typically short sales — in January alone. While BofA is clearly "selling" the most, it also appears to concur with why they don't show up on the fastest processing time trend, discussed further down in this article. JPMorgan Chase and Wells Fargo came in second and third, with just under 3,000 each. We also looked at which lenders and servicers registered the biggest increases in short sale volume in January compared to a year ago. That list was a bit more unpredictable, with PNC Financial Group Inc posting a 140 percent increase in completed short sales — the biggest increase among large lenders and servicers. Combined, the three government entities of Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) posted a 120 percent increase in short sales, while Ally Financial (formerly GMAC) posted a increase of more than 60 percent. 2. Short Sale Prices While it’s important to know which lenders and servicers are approving short sales in the greatest volume, probably more important to most buyers and investors is the average price they can get on a short sale. The three government entities combined (Fannie, Freddie and FHA) documented the lowest average pre-foreclosure sales price in January, slightly less than $130,000). Deutsche Bank had the second lowest average price for approved short sales, $132,996, and Sun Trust Banks, Inc. (Richmond, VA), had the third lowest average short sale price, $144,024. 3. Short Sale Time to Sell When it comes to identifying the best lenders and servicers to buy short sales from, the last piece of the puzzle is how long it takes to purchase a pre-foreclosure property. In the last few years, one of the biggest critiques of short sales is that they are not short at all, often frustrating the buyers and sellers involved. On this measure, the three government entities won out again, averaging less than 200 days from the time a property entered the foreclosure process to when the pre-foreclosure sale was closed. Next closest was Ally Financial, with an average of 321 days, followed by PNC Financial Group Inc., with an average of 353 days. Conclusions: A. Short Sale Activity is on the rise. I suspect the healthier housing market conditions will spur on the release of more short sale inventory as banks try to lessen the unproductive assets on their ledgers. B. Some banks are definitely showing dramatic increases in "selling," which also means processing their short sales once being marketed. Curious to note that none of the most prolific short sale banks appeared in the quickest sold category. I think this could be expected as a "jack-be-nimble-jack-be-quick" capability and those banks with the significant inventories have so much to process that it slows them down. Still, from my own personal perspective, managing both the listing sales process for my short sale selling clients and managing the buying sale process for my short sale buying clients, I can tell you that the process can be quite cumbersome and frustrating for all involved. This is why I often suggest properties that have extended DOM-Days On Market--as an alternative to those homes requiring lender approval for my buyer clients. Excessive DOM properties allow for more aggressive buying negotiation, usually with success, so that my buyer clients are able to get the extra value they are looking for when they first come to me after inquiring about short sales and, more importantly, they can usually hold the seller accountable for any home inspection issues (usually forfeited when buying a short sale) and they can be more in control of when they would like to close on their new home or investment property. My buyer clients that choose this route are usually able to close on a property in 30 to 60 days whereas the average short sale property still takes as much as 3-4 months to sell. In comparison, one of my many buyer clients has an all cash offer on a Bank of America Short Sale. Logic would dictate that once the BPO-Broker Price Opinion-has been done, we should be able to get the bank approval as there are no mortgages to worry about and the sooner the banks allows the property to close, the better off for one and all. Well, this client's offer has now been accepted for over 3 weeks and there has been no indications of anything from Bank of America other than that they have "started" the process. Mark Slade Keller Williams 917.797.5059
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