Foreclosures & Short Sales Need Governance

When an offer is made between a buyer and a non institutional seller, a timeline is set for the expiration of that offer, usually 24 to 48 hours. The seller must respond with one of three responses, acceptance, rejection or counter offer. The sellers agent is responsible to facilitate a timely response, acknowledging that the offer was received, is being considered, countered or rejected. This process allows the buyer to move quickly into purchasing that property, or moving on to another. In reality, the "teeth" in this system is that the seller emotionally involved and has a vested interest in selling the property. The fear of losing the buyer will force them to respond in a timely manner. This is especially true in a buyers market, where the sellers are struggling to get their homes shown, let alone sell for a decent price.

The current situation, where over half of all active properties (single family homes, condominium and townhomes) in the Las Vegas MLS are either completely bank owned from foreclosure, or are dependant upon bank approval as a short sale, do not follow the usual rules. The banks don't seem to have any concern that the buyer might move along to another property, the agents that specialize in these transactions don't have any tools at their disposal to expedite the transactions either, so a typical bank involved transaction can take as long as a month before a definitive answer is given. Then once the transaction is put into escrow, an REO transaction will take at the very minimum 45 days and a short sale will drag on for at least 60 days.

Our current inventory breaks down like this;

20,595 Homes/Townhomes/Condos for sale of which 5,645 are bank owned and 5,645 are short sale homes.

Of the 7,007 homes in contract, 3,589 are foreclosed properties and 2,064 are short sales.

This shows a pretty clear picture of what is "selling" in our market

56% of homes for sale are owned by or dependant upon banks or lending institutions

81% of homes in contract are owned by or dependant upon banks or lenders.

This does not bode well for anyone hoping to sell a "non-distressed" property or to have a purchase happen in anything resembling a timely manner.

A normal transaction between buyer and seller takes typically 3-5 days of negotiation, then 30 to 45 days to close.

A typical REO/Foreclosure transaction takes 14 to 21 days of negotiation then an additional 45 to 60 days to close.

A typical short sale transaction will take 14 to 60 days of negotiation with an additional 45 to 90 days to close.

To put it simply, a foreclosed property is going to take at least a month longer to sell and a short sale will take at least 3 months longer to sell than a regular transaction.

This is the point where I have to ask WHY!!!!!!!!!!!!!!!!! Why should our market be forced to stagnate like this. Shouldn't the banks have an interest in moving the inventory to improve market conditions and create an environment with good consumer confidence? The attitude I see from the banking and lending industry is one in which they will do things in their own sweet time. I believe we have all heard of "bankers hours", I just don't understand how they can drag on for weeks and months at a time. Especially when all that needs be done is to look at the bottom line, and decide yes, no, or how about this price instead. The same way a non institutional seller would. Perhaps the institutions haven't seen the need to designate a decision maker in this process that can actually make a timely decision.

As is I write this, I currently am working with 6 clients buying homes. Between them we have 9 offers on properties on the table. I have had a response from 3 of those offers, one took over a month, 2 responed in 7 to 10 days, the rest are unanswered and are in limbo. Then once my clients have responded back to the institutions, they disappear into the black hole from whence they came and do not correspond until the groundhog sees his shadow, the stars align, or the most common answere, "Monday for sure". My clients are frustrated, and like me are wondering why it is so difficult to get a simple affirmative or negative response.

This is a situation where the Real Estate Division needs to enact a mechanism that would streamline this process with institutional owners. It is blatantly obvious that the institutions themselves have no inclination to move in a timely manner. I am not one that likes a lot of government intervention in the market place, but in a situation like this where our market, is unnecessarily being put through a prolonged period of stagnation due to nothing more than a cavalier attitude towards the situation, I feel it is time for a little intervention. If institutions were to be fined an monetarily for not responding to an offer in a timely manner and that fine were given to the real estate division in the state in which the property exists, there might be a little more attention paid to making a timely response.

I do not suggest that institutions should flatly accept whatever comes down the line, I'm asking for a simple yes, no, or how about this price. This would speed up the time these distressed properties are on the market, would actually benefit the institution holding the note due to the fact that they would be off of their books that much faster, and would also end the stagnation. With inventory being absorbed back into the market at a quicker rate, less product would be on the market (lower supply) and prices might actually have a chance to increase as buyers have less to choose from (higher demand).

I'm not even asking for an unreasonable amount of time, perhaps 5 business days to respond on initial offers and 3 business days to respond to counter offers, as well as setting a 2 business day time limit on final signatures of approval at close of escrow. It is understandable that an institution might need a bit more time in making a decision to accept, reject or counter an offer, but to take weeks and months to respond exacerbates our current situation, by unnecessarily increasing the amount of supply in our marketplace.