Jul 10
13
Like all Realtors, there are a few niches and neighborhoods that I specifically track. What I am seeing in these micro-markets isn’t particularly pretty. I’ve noticed a bunch of listings fall out of contingent status and become available again — usually with a hefty price cut. While I am not party to these listings, often the “agent to agent remarks” will tell you, either directly or indirectly, what happened.
The most common reason is a problem with a short sale: either the “short sale approval” was more of a “short sale declined,” the bank decides they want a substantial amount more than the contract amount, or the buyer decides they’ve had enough waiting and they walk away. At least banks are working through the backlog of short sale approvals. That’s the only silver lining here.
The other common reason I am seeing for properties going back on the market is inspection/appraisal problems. Particularly when it comes to bank owned properties, some of our inventory is kind of beat up. Homeowner renovations with no permits are called out as the obvious disasters they usually are. Underwriting requirements to fix something (for example, a failing roof or broken windows) come to loggerheads with institutional owners who insist that the property is sold AS IS with NO REPAIRS, and yes, that’s often in capital letters in the contract. Inasmuch as I have seen conventional loans held to FHA standards recently, this problem isn’t going away.
Another sign that the market is slowing down: I am starting to see a few bank owned properties that are reasonably priced and in decent condition sit on the market for 2 weeks and then cut the price. This is something I haven’t seen happen in about 18 months now. It does mean that some institutional sellers are serious about getting these properties off the books. It also means we aren’t seeing as many buyers as we did 6 months ago. So while prices may have ticked up a bit in May, they are ticking down now.
I’d like to leave you with just a few items on foreclosures, short sales, and mortgage modifications. Some short-sighted people are pushing to hold you responsible for a foreclosed mortgage — in effect manufacturing a personal guarantee after the fact — despite the fact that a mortgage is secured with a real asset. In some cases, and I am begging you to consult a lawyer if you think this may apply to you (Are you in Nevada? I’ll recommend one!), bankruptcy may leave you in a better position than a foreclosure. The MERS mess gets worse, but you won’t be able to take advantage unless you are in bankruptcy or a state with judicial foreclosure. Massive equity loss means that severely underwater homes are now almost everybody’s problem (short sales aren’t going away any time soon). And finally, if you are negotiating a loan modification or short sale, please make sure your negotiator is in regular contact with the loss mitigation department, the foreclosure department, and the trustee!
