Lenders are hurting our housing market

Last article was about how short sales are more commonplace.  What you are not seeing is how some of the lenders involved with these properties are dragging down the overall housing market.

In a normal process, a seller and their agent will often respond to an offer the same day or within a day.  This keeps the motivation of both sides connected together.  However, with most of the short sales I’m seeing today, the lenders are taking 45-60 days to respond back to a willing buyer who has presented a credible offer!

Why so long, you ask?

1)    The lender needs an entire financial package from the homeowner that proves he/she cannot afford the loan (most listing agents will have that done before or as the home is listed so that won’t be a cause for delay.)
2)    The lender needs to order and receive 2 appraisals to see if the current offer is close to market value (This should only take a few days)
3)    The lender needs to review the original loan files and application to see why this has gone bad (makes sense to me, but we are still getting loan approval for new buyers within a week even in today’s tighter credit market.)
4)    The lender needs time to research the original loan/sale participants in case there is fraud being committed – the borrower, their loan agent and officers, the appraiser, the Realtors.  Ok, maybe a week more.

I cannot see where we get 6 weeks from those activities.  By the time lender approval is granted (after 6-8 weeks) the original buyer has most likely lost patience and have start looking or even already bought another property. 

What kind of buyer waits 60 days to hear if their offer is accepted?!  Ah, one who is willing to put up with the “pain” and uncertainty.  But pain has a price.  Buyers are now discounting almost any short sales by 10% because of the “pain” factor of having to wait 60 days to hear if they have a deal.  Of course, the lender is never going to get the best price if they take 2 months to grant approval – what are they thinking?

Even more unfortunate is the suffering that non short sale sellers are experiencing.   Now that we know the short sale inventory needs to be priced below market to get buyers attention and attract a patient buyer who is willing to go through the long and painful process, the normal and regular homes priced at fair market value will sit on the market longer.  Or worse yet, they will need to drop their price to compete with the short sale sellers and get buyers attention.  Either way, this is not a healthy result because no one wins.

What I don’t understand is how lenders are laying off people because real estate transactions are down and they are not placing as many loans – so why not put those people to work on short sales who get offers so we can all move quickly and everyone is happy.  If lenders can’t speed up the process, we all need a dose of patience.


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