It's not really exciting...

From the Jack’s Winning Words Blog comes this - “The idea of waiting for something makes it more exciting.” (Seen on an Andy Warhol poster). Normally I agree with Jack, who went on to site examples in which that little saying made sense, like waiting for Christmas or for a new baby to arrive. However, in real estate there is one waiting game that does not make things more exciting; it’s just plain annoying.

Waiting for banks to get back on offers that are made in short sale situations has become pure torture. The banks are overwhelmed by the case loads that they have and the bureaucracies that they have in place to deal with the issues of short sales. Stories abound of banks taking weeks, even months, to get back on offers on short sale and foreclosed houses. I’ve personally had 3-4 deals this year that didn’t go through because the buyers just got tired of waiting for a bank reply.

Short sales are particularly notorious for the length of time that one may have to wait. In those cases, the bank doesn’t yet own the property. The owners are often in arrears and may have already received default notices; however, the Sheriff’s Sale hasn’t taken place yet. The bank is being asked to take less than it is owed, even before the foreclosure process even starts. A variation on this same scenario is called a “short refi”, where the bank is asked to accept less than it is owed on a refinancing loan. In either case, the bank is gong to be out some portion of what it is owed, so you can see why it doesn’t just jump on these deals.

The logic from the homeowner’s perspective is that that bank should be willing to take less than it is owed to avoid the hassle and cost of going through the foreclosure process and the cost of managing the foreclosed asset. That makes sense; however, logic seldom hold sway within large bureaucratic organizations. Most of these institutions have policies for dealing with defaults that were put in place years ago and have never since been reviewed or changed. Rules and procedures that were meant to deal with an occasional default are now failing under the load of 1 in 10 homeowners being in trouble.

A few institutions that have already failed and which are now under new ownership and management (IndyMac Bank and Countrywide come to mind) have changed their policies and adapted new policies and procedures for trying to deal with the tsunami of defaulted loans that they face. My sense is that other banks are trying to come up with new strategies, but I’m reminded of that oft-used and ridiculous example of trying to change a tire on a car that is going 100 miles per hour – it’s tough.

So, we will end up waiting and waiting for replies on most short sales and some foreclosure sales; and we will be neither excited nor amused, just frustrated.