In a recent AP story, a survey finds that California real estate agents and brokers see banks lagging when it comes to reviewing loans for short sales.
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Banks slow on short sales, survey finds
Banks are dragging their feet when considering so-called short sales, an increasingly prevalent type of real-estate transaction in which lenders allow homes to be sold for less than what is owed on them, according to survey of California real estate agents to be released today.
Nearly two-thirds of the 2,150 respondents to the California Association of Realtors’ survey of member agents said banks took longer than 60 days to respond to short sale offers and that less than three out of every five offers ultimately resulted in a sale.
The response times are much longer than those specified in government guidelines for banks that agreed to participate in programs that help troubled borrowers when they accepted a share of the $700 billion Wall Street rescue.
“The survey results show that the short sale system is clearly flawed,” CAR President Beth L. Peerce said. “Increasing the number of successful short sale transactions is one important way we can help California families and move our economy closer to recovery.”
While the survey covered agents only in California, National Association of Realtors spokesman Walter Molony said similar complaints have come from across the country, especially from states with hard-hit housing markets such as Nevada, Florida and Arizona.
“Banks just have not been equipped or willing to make quick decisions on this,” Molony said.
Short sales have played an increasingly large role in California’s real estate market, with declines in property values leaving many borrowers with crushing payments on mortgages that are greater than their homes’ worth.
The transactions allow troubled borrowers to dodge the hit to their credit scores that would come from a foreclosure, while banks are able to keep distressed properties off their books without going through the costly foreclosure process.
The estimated percentage of resales in the state that were short sales nearly doubled from about 10 percent in 2008 to 18 percent in 2010, according to tracking firm DataQuick Information Systems.
But foreclosures are still much more common, accounting for nearly 38 percent of all resales in 2010, DataQuick said.
Richard Green, who directs the University of Southern California’s Lusk Center for Real Estate, said the market would benefit from avoiding foreclosures, which can lead to homes languishing on the market.