Why do short sales take so long?

When you see a large lender like Bank of America or Wells Fargo, you usually think it’s the bank that is losing money on the loan if they decide to sell the home for less than what is owed.

But the truth to the matter is that for “most” of these loans, there is an investor who has asked these lenders to loan out a block of money, usually in the hundreds of millions of dollars and the banks are just servicing them.  It’s not the banks money, it’s the investors or a group of investors who have their money on the line. There is also Fannie and Freddie Mac government backed loans.

Remember, these investors have never seen the home. All they see is numbers. They are relying on the listing agent to get as much money back as possible for their investment.

The lender and investors are also worried about fraud. How do they know if the home owner is selling their home to a friend or relative for a lot less than what the home is worth? They don’t. They need to do their due diligence as best as possible.

It’s called an arms length transaction where all the parties sign a document that there are no side deals and that they don’t know each other.

Another reason the short sales take so long is because many times there is more than one loan and you are now trying to satisfy two or three lenders/investors. That’s very time consuming. Many lenders are also under staffed. They have thousands of delinquent loans, and only so many employees to service them. Remember, many banks have gone under and are on longer in business, so they have had to cut down on their payroll.

The home owner can also be the one who is delaying the time line. Either because they have failed to provide all their financial’s and a hardship letter, or maybe because they want to live in the home as long as they can without having to pay their mortgage. What lender(s) have done to take steps to shorten the time line?
Wachovia is the leader among all the lenders up to now. They have addressed this problem by setting up a system where they have a manager come out and meet with the home owner and listing agent and they determine what fair market value is.
Once they receive an offer, it only takes 45 days for them to make it happen. Wachovia is by far the most advanced up to now.

I’ve recently heard rumors that Wells Fargo is about to start a pilot program where after a home owner is turned down for a loan modification, they will agree to a short sale with the home owner.

If you have any question about short sales or any real estate related questions, please feel free to write or call.

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Good Morning Everyone!

For those of you who know me well, you may know that I am a bit of a wine snob  enthusiast. I’m often known for finding good deals on some of my favorite wines or being a go to guy when planning trips to Napa, Sonoma or Paso Robles.

Last year I went to my first “Passport to Dry Creek” event. While many vineyard-plentiful regions hold this type of event I’m going to tell you why this is my favorite one. Dry Creek Valley is located primarily in Healdsburg, CA — Sonoma County. This is an area known primarily for its amazing Zinfandels. However, many wineries in the Dry Creek Valley also produce award-winning Cabernet Sauvignon, Sauvignon Blanc, and Pinot Noir.

I vowed I would never publicize this event because of how hard it normally is to obtain a ticket. Normally you have to know someone, be a highly active wine club member of a participating winery (all participating wineries are members of Winegrowers of the Dry Creek Valley) or be one of the limited few who acquires tickets through a raffle system. However, tickets don’t be seem as hard to come by this year, maybe because of the economy, or maybe because of the awesome new first come, first sever system that the winegrowers office set-up this year? Tickets run $120 for the weekend (Saturday and Sunday) or $70 for Sunday-only. Saturday is considered the best day to attend (and most crowded) but they do not offer a Saturday only ticket.

Want tickets for the event? (being held April 24^th & 25^th) Visit www.wdcv.com.

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Hello Readers,

Sorry, this video is a few months old. I posted it on my twitter account when it was uploaded to YouTube, but forgot to post it here! For those of you on the fence what Realtor to choose in your home search, hopefully this video of my clients will help you out

A few months back I had the privilege of meeting Ash Sud, CEO of San Francisco’s newest eco-friendly moving supply company; ZippGo. After tweeting back a forth a few times I did a phone interview and had the privilege of hearing the vision behind this amazing new company.

The reason it took so long to post a finished article is because the real estate market has picked back up, so that means there are now more of you moving again. Next tine you’re ready to run to your local UPS store, U-Haul store, or self-storage retail store; think green and call ZippGo.

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The securities — comprised of residential mortgages bundled to diversify risk — have long fueled the housing market. But after the sub-prime meltdown, investors viewed mortgage securities as too risky.

Starting today, private investors have to step back up to the plate to buy up the $1.5 trillion in mortgage-backed securities likely to be produced this year. Will they? Or will the government withdrawal leave a vacuum in the housing market that could push interest rates higher, as some fear?

So far, investors seem to be warming up to the idea of putting their money into mortgages again. Strict screening of borrowers and cautious lending under Fannie, Freddie and Ginnie means that mortgage pools are once again safe bets, and private investors are currently buying more than two-thirds of the securities. Prices of short-term securities are competitive with other investments, and have stabilized since the Fed started its buying program, a sign that investors now trust them.

And the federal wind-down has been orderly. It has signaled its intent to end the program, and has been steadily reducing its purchases since the beginning of the year.

As a result, the market has not been jolted, says Fogarty. Private bond investors seem to be picking up the slack for the Fed. Average interest rates for 30-year home loans have stayed under 5 percent, near its historic low point recorded at the end of last year, according to the Freddie Mac Primary Mortgage Market Survey for March 25.

“There has been a relatively liquid and stable market for Freddie Mac securities throughout the capital crisis,” says Freddie Mac spokesman Michael Cosgrove. “What’s important is that there is liquidity in the market and there have been investors that have been stepping up to buy.”

There’s still unfinished business to deal with, however. The Fed still has that $1.25 trillion in securities on its balance sheet – far more than it spent bailing out AIG and other credit insurers. One-fourth of all Fannie and Freddie securities are now the Fed’s property. (Fannie and Freddie themselves hold another 25 percent.) Some conservative economists have expressed concern that when the Fed tries to unload all that debt, it risks increasing inflation. (For a paper by Stanford University economist and monetary policy expert John B. Taylor on the topic, check out this pdf).

But overall it’s pretty hard to find the bad news here. Interest rates are likely to go up a quarter of a percent at most, much lower than many had predicted. The Fed has been generating tens of billions in income off these investments. And while inflation poses all kinds of problems for an economy, it also has a silver lining, because mortgage payments may end up taking less of a bite out of a household’s income