I'm writing this as much to get other opinions as to express my own. My Team and I have been pondering why in all our training and experience, the watch word for closing a successful short sale seems to be to planning for a very long waiting period for bank response - 30 to 60 days is pretty typical. We have a current offer that was first submitted in March with still no bank response. I thank the Distressed Property Institute for instilling in us the right expectations about how long it may take the bank to respond to offers and how to best ensure our success. This article is to raise the question, why are the loan servicers taking so long and what can we do about it?
In cases where the bank is local we can communicate more easily to obtain a timely response. However, servicers for larger banks are taking much longer to respond to short sale offers, and even with our training to manage the buyer's and seller's expectations, this long servicer's response time is beyond the reasonable planning and expectations of most buyers in a real estate transaction, and thus reduces many seller's chances of completing a short sale in the window available prior to foreclosure.
The loan servicers are no longer receiving payments for the loans and apparently have few resources and little incentive to hire staff and improve processing turnaround. A typical negotiator may have hundreds of files to manage, and the process appears very inefficient. They constitute an economic externality that no other party to the transaction is empowered to improve or cure. While a recent press release at financialstability.gov implies that the government has completed steps to reduce unnecessary foreclosures and is moving on to address regulatory issues, both our local Kitsap Real Estate market and the national market have a large shadow inventory of homes. Now there are reports that this shadow inventory may return to the market as properties in foreclosure following unsuccessful loan modifications. The time is ripe for the Government to reduce other incentives and to provide incentives to loan servicers to process short sales when completing such would be beneficial to all parties. In a sense, this would be a bailout for homeowners credit instead of subjecting them to unnecessary consequences for the hardships imposed by a failing economy and real estate market. The Government has certainly given this same benefit of the doubt to the large banks.
In May there were news articles announcing that some incentives for short sales were to be added to the "Making Home Affordable" portion of the Financial Stability Plan. The makinghomeaffordable.gov website does not include any obvious reference to these changes or provide discussion of a short sale in the frequently asked questions. We know too that FHA/HUD have clear guidelines for processing preforeclosure sales.
Approving short sales where the seller can demonstrate valid hardship and has no more liquid assets to contribute benefits not only the seller, but also the bank, the neighborhood, and the buyer. With a reasonable turnaround for bank approval, millions more short sales could be completed without the need for foreclosure and its attendant consequences.
I think this issue is very important to the restoration of our banking system, lending, employment, and economic recovery in our country.
Statistics we refer to are for that part of Poulsbo encompassing the downtown core, from the head of Liberty Bay southeast to Ne-Si-Ka Bay, including parts north to Sawdust Hill Rd. The market for other parts of Poulsbo and its suburbs should have approximately similar trends. Homes in Poulsbo were selling for a three month moving average median sale price of about $279,000 at the end of March, down about 19% from a year ago. Poulsbo's March median sale price was $323,000, about 8% lower than in March 2008. Kitsap County’s 3 month moving average median price has fallen 15% over the past year. The 3 month moving average number of Poulsbo closed sales is down about 45% from a year ago. March pending sales in Poulsbo were up 18%. The number of March closed sales for Kitsap County dropped 21% compared to last year. The Poulsbo listing inventory (141) is 12% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 8.8 months, improved from 30 months last month.
Using the example of Kingston - the largest housing market in North Kitsap - homes were selling for a March median price of about $332,500, 17% less than a year ago, while the 3 month moving average of median closed sale price has fallen 19% compared to a year ago. Kingston prices fluctuate more than some of the other markets because of the lower listing and sales volume. Kitsap County’s 3 month moving average median price has fallen 15% over the past year. The 3 month moving average number of closed sales in Kingston is the same as a year ago, and the number of March pending sales is down 43%. The 3 month moving average for number of Kingston closed sales is down 20% from a year ago. The number of closed sales is down 21% Countywide from a year ago. The number of active listings in Kingston (72) is down 23% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 36 months. Kingston is a buyer's market.
Statistics we refer to are for that part of Bremerton encompassing the downtown core and west to Kitsap Lake. The market for other parts of Bremerton and its suburbs should have similar trends. Homes in Bremerton were selling for a month end median price of about $137,500 at the end of March, about 18% lower than a year ago. The more stable 3 month moving average of median price for closed sales has fallen 4% from a year ago. Kitsap County’s 3 month moving average median price has fallen 15% over the past year. The Bremerton 3 month moving average number of closed sales is down 5% from a year ago (compared to a Countywide drop of 21%). The number of March Bremerton pending sales is up 4% from last year. The number of active listings (158) has rose 3% from last month but has fallen 37% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 7.9 months, which reflects the greater percentage of lower priced homes that are selling. The Bremerton market is still a buyers market.
Residential homes on Bainbridge Island were selling for a month end median price of about $825,000 at the end of March, 18% higher than a year ago. The three month moving average of closed sale prices ($609,667) is down 7% from a year ago. You can’t read too much into the apparent price rise - overall we think prices are still going down. However, the distribution of buyers has changed as properties in the higher price ranges are now selling. There are several factors - low interest rates, anxious sellers, and a slowly reviving market for jumbo loans all must be contributing to some extent. Kitsap County 3 month moving average median price has fallen 15% over the past year. The 3 month moving average number of Bainbridge closed sales is down 8% from a year ago, and the March number of pending sales is up 16%! The 3 month moving average of closed sales is down 21% Countywide from a year ago. The number of active listings on Bainbridge (219) is down 13% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 15.6 months, down from the 22.4 month turnover rate of last month. Bainbridge Island is a strong buyers market.
My team at Prowse and Company has been selling Kitsap County real estate since 1998. We are passionate about providing high quality service and maintaining our relationships with our clients.
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