October 4, 2011 (Jeff Alan)
Long wait times and a litany of obstacles has taken the luster off the purchase of short sale properties for first-time homebuyers according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.
Short sale purchases by first-time homebuyers dropped to 39.7 percent of all short sale transactions in August, the third straight month of declines, and down from the peak of 54.1 percent in November 2009.
Despite an average price that is 27 percent lower than non-distressed properties, obstacles being cited by buyers such as lost paperwork, coordination with multiple investors, slow appraisals, mortgage servicer understaffing and processing times averaging about four months have made short sale less popular with first-time homebuyers.
The California Association of Realtors® (CAR) released a similar report in August citing many of the same problems, not only for first time buyers, but for all buyers of short sales properties.
The three most frequently cited obstacles that California Realtors® reportedly had to contend with during the short sale process were slow response times to a short-sale package, repeated requests for documentation, and poor communication with lender representatives.
Seventy-four percent of the California respondents said it took lenders and servicers more than 60 days to return a written response on the approval or disapproval on submitted short-sale agreements. Half noted that lenders took more than five days to return any form of communication.
Distressed properties represented a total of 45.9 percent of all sales nationwide in August, down from 46.2 in June. Short sales accounted for 17.1 percent of the homes purchased with damaged REO and move-in ready REO accounting for 13.2 percent and 15.6 percent of the homes purchased, respectively.
Unfortunately, some real estate agents reported that homebuyers who are frustrated with the short sales process have resorted to placing offers on multiple properties with the intention of closing on only one, further slowing the short sale process.
“I feel that selling agents are telling the buyers it’s okay to write multiple offers because they can walk away with no risk, especially on short sales,” reported one agent. “The short sale market is fraught with deceit and corruption. First-time home buyers are hardly in the game when they try to purchase a short sale listing,” added another.
Tags: Campbell/Inside Mortgage Finance, HousingPulse Tracking Survey, short sales, first-time homebuyers, purchase obstacles, distressed properties, REO
Campbell/Inside Mortgage Finance