As an active short sale broker, assisting both buyers and sellers of short sale properties, I consider it a critical party of my job to help keep all parties involved and informed.

A recent statistical article by RealtyTrac, one source for Foreclosure Activity across the US, posted its recent statistical summary releasing statistics for the number of foreclosure properties nationwide, along with comparing the value of non-foreclosure properties to those properties that have been through the foreclosure process and are then sold by the Bank or lienholder.

It’s a statement of our current market to see that even nationwide, foreclosure sales made up almost a third of all properties that actually sold during the first quarter of 2010. Locally, in Auburn WA, the combination of short sale and bank-owned properties comprises a much higher percentage of residential sales.

Even more importantly to all homeowners, whether selling or not, however, is the statistic that properties that have completed the foreclosure process and are now owned by banks (“Real Estate Owned” (REO) properties), have a discounted price 34% lower than comparable properties that are NOT REO properties!

Short sale properties, conversely, look to be discounted about 15% nationwide from their counterparts that are not short sale or bank owned.

So … Mr. Bank … Please cooperate with us to get this short sale property off market. It’ll save you 19% NINETEEN PERCENT and keep prices higher!

(off my soap box now ….)

Although I run statistics frequently, I hadn’t actually compared different parts of the region as far as distressed property sales. Curious, I went to our Northwest Multiple Listing Service to run some quick stats. No, it’s definitely not just my imagination: short sales and bank-owned properties are far more prevalent in my business areas of the south King County and Pierce County areas. 

So here are the facts as of this morning, May 18, 2010 of the residential properties that I work most frequently (single family, condominiums, and manufactured homes): 

In King County, there are currently 15349 unsold properties. (Some of these do have offers of one sort or another.) Of those unsold properties, 971 are noted as being Bank-Owned, while another 4207 are noted as requiring Short Sale or some other third-party approval before the sale can close. Okay, that computes to about 33.7% of unsold properties being either bank-owned or short sale nature. 

In Pierce County, there are currently 6755 unsold properties. Of those, 741 are bank owned and 2178 are short sales. That’s approximately 43.2%. 

Now, to get even more specific, I live and focus my business (although not exclusively) in Auburn, a smaller community that spans the King and Pierce County lines. In the Auburn area, there are 463 unsold listings, 68 bank-owned and 228 short sale properties. YIKES! That’s 63.9% of all listings in my area!

So here’s the point: If you plan to buy or sell a property in the south King County or Pierce County areas where properties are so affordable, be sure that you’re working with an experience Short Sale or Foreclosure Agent. 

Taking the certification class was a fascinating experience – of the group of approximately 50 agents present, fewer than 30% of the agents had ever handled either the buyer or seller side of a short sale property! Wow, where have they been and how on earth are they still in business?

When questioned about where they work, well over half of the agents at the class focused on the east and northeast sides of King County – i.e., Bellevue, Redmond, Issaquah, Sammamish, etc., where short sale and bank owned properties aren’t as prevalent as they are in my practice areas. (Briefly, a short sale property is identified in our MLS as one where a property’s sale price is less than its outstanding indebtedness and some sort of negotiation, concession and/or approval is needed by the lien holder(s) before a sale can be completed.)

These types of transactions – for BOTH Sellers and Buyers – require considerably more experience and expert handling than do “regular” purchases and sales (whatever those are – I’ve almost forgotten!). From our informal classroom survey, it’s possible than over 70% of agents in our area have never handled a short sale or bank-owned property!!

Therefore, when you find yourself in need of help – or know someone who does – buying or selling short sale or foreclosure properties, call an experienced agent! I can be reached by phone at 206.300.8421 or by e-mail at gabrielle@gabriellenemes.com.

Loan Modifications are one avenue that troubled homeowners can take when income levels drop or expenses skyrocket due to unexpected bills such as medical costs. There are a number of different combinations and types of loan modifications available, although I understand that very few loan modifications have actually been successful.

I try to keep an eye out for success stories and, indeed, I know of ONE family that was successful in their quest for lower monthly payments due to a layoff. It took months, lots of frustration, but ultimately they were able to drop their interest rate from the upper “sixes” to about 3%. I’ve talked with a number of potential clients … and now clients … also about their pursuit of loan modifications so that they were able to remain in their homes. These folks just weren’t able to push a loan mod through and finally gave up and listed their homes for sale. A couple actually decided to let the house go back to the bank through foreclosure.

So sad.

RIS reports that homeowners that ARE successful in negotiating a loan modification through private lenders are now finding credit score reductions up to 100 points! That’s certainly causes a significant impact on the homeowner’s ability to obtain future credit at a reasonable rate. Just imagine having a credit score of 750, successfully negotiating a loan modification on your home loan so that you can stay in your house … then finding yourself in a position where you must purchase a new car. Under the scenario RIS reports, your credit score could now be 650 — a real hinderence in obtaining a car loan with a reasonable interest rate!

According to the RIS report, the federal loan modification programs, Making Home Affordable and Home Affordable Modification Program, do not reduce credit scores as the transaction is reported to the credit agencies as a “loan modified under a federal plan” as of Nov. 1. However, if you modify your home loan through a private bank or other lender, your credit score could be impacted significantly.

Click Here to read the entire article … then pay attention: Watch Your Credit Score if You Do a Loan Modification!

While definitely not unique to these geographic areas, price points and demographics of buyers and homeowners for these areas seem to especially target short sales and bank owned properties. Or maybe it’s just the clients with whom I’ve worked over the last few months. Sellers need to sell–usually as quickly as possible–and Buyers just want to move in.

In any event, short sales have been a problem. It seems as though it’s nearly impossible to get bank approval in anything less than 120 days … and then IF we get approval, the banks want us to close the transaction in no more than 30 days, another feat that’s becoming more and more difficult.

Back in May, 2009, President Obama indicated that he was pushing forward legislation that would drastically change the method and bank requirements by which short sales would be approved. This was aimed at shortening the time the banks would have to approve such transactions, along with helping a distressed seller by eliminating the “pay back the difference to the lender” clause that has been a real sticking point.

FINALLY, on Monday Reuters reported that the Treasury Department has now set guidelines to simplify short sales. I can’t tell you how excited “I” will be when this finally happens. And when the Banks step up and get their own internal procedures in place to accommodate these new guidelines.

I’m maintaining an “I’ll believe it when I see it” attitude. It’ll be cause for rejoicing!!