San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

The announcement of HAFA in April was supposed to change the way we do our business for those of us who do a lot of short sales.  Not because it was supposed to revolutionize the way short sales were done, but because it was going to be the Federal Government stepping in and trying to standardize the process of how to complete a short sale.  In the lawless world of short sales, that was like a cool breeze on a hot sticky day: very much welcomed.

Many naysayers poo poo’ed the program, saying it was never going to fly and that lenders would not abide by the terms because it was not in their favor.  But you know, there always will be naysayers whose job it is to simply criticize any new idea that comes along which challenges the status quo.

Yes, there are still glitches in the system and many employees of banks do not understand or have not been trained in HAFA and we get to deal with a high percentage of them who are not helpful.  However, an announcement made last night will resonate and have long term impact on the dynamics of the distressed properties marketplace, in my opinion.

Matt Vernon, the executive in charge of short sales and REOs at Bank of America (BofA) announced that institution will now focus on short sales to liquidate their assets before they get into foreclosure.  “We’re going to do everything possible to liquidate property prior to foreclosure,” Vernon said. “REO will still be available, but we will do everything we can to do short sales.”   This is wonderful news for consumers as their underwater properties can be disposed of without having to be forced into foreclosure and devastating their credits.  This is also good for banks because industry surveys have shown that nets proceeds to banks are significantly higher when short sales are utilized as compared to REOs.  BofA is of course is still in the business of making money and has chosen a profitable method, but this method also benefits the homeowners as well. And with all of the loan modifications applications out there, and the unfortunate reality is that a large percentage of those loan modifications will default and end up on the foreclosure circuit.

Mr. Vernon has spoken previously and have been pushing for the notion of short sales taking a more prominent role at BofA. BofA was suffering  from backlash on their Loan Origination business as a consequence of them developing a notorious reputation in the short community as being difficult to work with.  This move will be followed by other banks in my opinion, like airlines follow and match fares when one major player comes out and takes a stand.

HAFA may not have lived up to the expectation people had about its efficacy in making  short sales easier to handle or process, but what it has done is provided an environment where a big player like BofA can come out and concentrate on short sales as a major tool to unload their real estate portfolio.  This move on the part of BofA has now pushed short sales out of the niche market and pushed it into the mainstream, making it easier for consumers to get short sale approval, and hopefully quicker too. Now here is truly a win-win solution for all involved parties.

I know everyone hates dealing with short sales and REOs.  The common complaints are that they take way too long and are too uncertain.  Buyers try to avoid them, but that is not becoming possible now.   Look at the new data, distressed properties represent 50% of all sales in California.

This trend will increase rather than decrease because of what is coming down the road.   Starting next month (scheduled for April 5, 2010), distressed homeowners and their lenders may start receiving financial incentives if they agree to a short sale. The Federal Government has come to the conclusion, if you cannot qualify for a loan modification through HAMP, then the next logical step they encourage is a short sale through HAFA.  Starting next month, those same homeowners and their lenders may start receiving financial incentives if they agree to a short sale.

What percentage of the properties currently on the market are distressed (either short sales or REOs)?  As a San Jose Short Sale Agent,  I’m always curious about this answer as a barometer of what is happening in Silicon Valley and specifically with distressed properties.

I went to the MLS and pulled all of the active listings on one hand and pulled all of those same properties which were listed as either “short sales” or “REO”s.    The data below are for all Single Family and Condo/Townhomes in Santa Clara County that are active as of today, November 11, 2009.

The answer to  the question I posed above is 30%. The ratio for distressed properties to all active properties is 838/2780 or 30% by my calculation.  It will be interesting to see if this percentage increases or decreases in the coming months.

Distressed Properties

All Properties

As a San Jose Short Sale Agent, I wanted to know what percentage of the properties listed in the local MLS represented distressed properties.   Rather than rely on other people’s interpretation of the data, I decided to pull my own directly from the MLS.

I first pulled all of the particular types of property (either Single Family Residences or Condo/Townhomes) which were in active status  today in Santa Clara County.  Then I pulled from all of the same properties the ones that were identified by the listing agents as Short Sale and as REO (bank owned properties) to get the results.

The numbers were significant, but a bit less than I had anticipated.

Single Family Residences – Total Distressed Properties represented 26% of the properties for sale.

Condo/Townhomes - total distressed  properties represented 33% of the properties for sale.

Given the high rate of unemployment in California and the current status of the Alt-A and Option ARM loans resetting in the coming months, I believe, unfortunately,  this number will steadily increase.