Michael Schennum/The Arizona Republic A home is advertised as a short sale this month in Phoenix. While the short-sale process has been seen as a rocky and difficult experience for buyers and sellers alike, banks now hope speeding the transactions will help alleviate confusion and disappointment.
For a financially struggling homeowner, the decision to pursue a short sale does not come easily.
Homeowners who make that choice generally do so after months of searching and pleading for an alternative that would have kept them in the home.
Even when it goes smoothly, the short-sale process is painful for sellers. When it's bumpy and slow, the pain is far worse, said experts who met in Tempe this month for an educational conference on short sales.
Far too many short sales have been plagued by false starts, confusion, delays and disappointments, they said.
Phoenix-area short-sellers' many encounters with insult upon injury stem from a combination of problems, including sellers' lack of experience with the process and lenders' initial reluctance to adopt on a mass scale what they had long considered an obscure means of resolving bad mortgage debts.
Scottsdale resident Mary Purvis, 57, said Bank of America finally approved her short-sale application after 10 months of frustration and uncertainty.
But the pain didn't stop there.
"The sale finally went through last September, but now BofA reported my short sale as a foreclosure on my credit reports, which I have no idea how to fix," Purvis said.
Big mortgage lenders such as Bank of America and Wells Fargo are still smoothing out the wrinkles in their respective solutions to making short sales faster and more reliable. But they are now taking short sales
very seriously and have made many improvements, one bank representative said.
Just as the average Valley homeowner never imagined losing a home to financial hardship, the average mortgage lender never dreamed the bank would have to set up an assembly line to churn out short-sale approvals.
Purvis did not attend last week's conference to confront her lender directly, but Charlotte, N.C.-based Bank of America's Matt Vernon, the bank's top executive in charge of foreclosures and short sales, was there to face a roomful of like-minded consumers.
Vernon was quick to admit the bank's flawed handling of short sales, but he said Bank of America has since taken a 180-degree turn.
It has implemented an automated system - the first of its kind - for tracking the progress of short sales and has reduced the average number of days it takes for a short-sale to be approved, from 90 days to just over 50 days.
The bank approved 18,000 short-sale applications in April, Vernon said.
Unfortunately, it received more than 50,000 short-sale applications that month.
"Our system was never designed to handle this kind of volume," said Rick Sharga, senior vice president and chief economist at RealtyTrac, based in Irvine, Calif., which collects and analyzes nationwide data on short-sales and foreclosures. "Short sales were never intended to be a mass-market product."
That's exactly what they have become, said Sharga, who spoke Friday at a Tempe conference organized by the Distressed Property Institute, a San Diego-based business that has developed a certification and training program
for real-estate agents and other buyer and seller representatives in short-sale transactions.
Company founder and CEO Alex Chafen said the institute's twofold purpose is to teach real-estate professionals how to be more effective at negotiating short sales, while giving homeowners who need representation a way to separate the short-sale experts from the novices.
The company created a special designation, Certified Distressed Property Expert, which it hopes will become synonymous with short-sale expertise.
What is a short sale?
In a short sale, a homeowner seeks to sell the home for less than the amount still due on the mortgage. All lenders with a lien on the mortgaged home must agree to the short sale's terms, because they will not be compensated for the full amount of the mortgage when the home sells.
Tips for prospective short sellers
• Do not wait until foreclosure is imminent to initiate a short sale.
• The seller's agent bears the brunt of responsibility for making sure the sale is completed. When choosing an agent, ask for references from previous short-sale clients and other proof of expertise, such as Certified Distressed Property Expert certification.
• Be prepared to prove financial hardship. Lenders usually require the two most recent tax returns, bank statements, loan statements, pay stubs or other proof of income, along with a hardship letter explaining your circumstances, a detailed description of the home's current condition, closing documents from the home purchase and authorization for your representative to negotiate with the lender.
• Contact the primary mortgage lender for instructions on submitting a short-sale application. Be sure to include every document the lender requires.
• The seller or representative should call the lender every day until a short-sale negotiator is assigned, and then call the negotiator every day until he or she orders an appraisal or broker price opinion of the home's value.
• With an appraisal and comparable buyer's offer in hand, negotiate with the lender for approval.
Banks tout new short-sale processes
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