What a mess! Fixing the foreclosure/short sale nightmare.

By rerockstar • September 1st, 2009

What A Mess

Is there a solution?

As real estate sales have picked up in many parts of the country, including San Antonio, I’ve been thinking more and more about the state of foreclosures and short sales as a chunk of the inventory of homes that I see languishing on the market. I had a few clients that were searching for foreclosures and short sales and after weeks of looking through them, we wound up buying non-distressed properties. There were several different reasons and each one provides a clue to ways we can fix the nightmare of foreclosures and short sales that have caused changes in the market and left many people wondering, “Why aren’t we doing more?”

First things first. Let’s do what we can to prevent foreclosure from continuing. There have been many initiatives to help stem the tide, but none have really stopped the bleeding. Unfortunately, foreclosure seems to breed on itself. Real estate agents all have the same thoughts, let’s try to find solutions to keeping people in their homes and when necessary, let’s find ways to clear those homes off the inventory. Just one look through Google for “foreclosure nightmare” and “short sale nightmare” and you’ll see that the work to clear the inventory off the shelves isn’t always an easy road – for agents or consumers. Both parties are often left with a confusing mess that doesn’t fix much of anything.

Let’s look at the problems.

The problems are varied and not all apply in any one case of foreclosure or a short sale, but most are things I see on a daily basis in my work as a real estate agent and I think we can improve upon.

Foreclosure and short sale listings. This one drives me nuts. It drives my buyers nuts too. Many of the short sale and foreclosure listings are done with little information and few photos. Descriptions that lack much info on the home and are more about their status as a distressed property that is sold “as is” don’t help us sell the property. Buyers are searching the internet and discarding homes that don’t give them enough information or have enough photos for them to get a good picture of what the home has to offer. Yes, we know the interior looks like hell…but we want to know that and make our own decisions before we pack up the car and go visit. Give us accurate, complete info and we might just take a look. REO (real estate owned) agents need to step up their game in advertising and marketing these properties. Stop short changing the bank and only giving them half of the service. Banks seem to be unaware at the poor listings I am seeing, because if they were, they might have a serious talk with some of their listing agents.

Pricing. Sure, these are distressed properties and are usually offered under market value. Here in San Antonio, what I notice is that foreclosures are not kept up with while they are empty and if you know anything about South Texas and our current drought, you know the dreaded “f” word. Foundation. I have seen so many foreclosures with foundation issues (I’m not a structural engineer, but when I enter a home and “roll” to the back door in one step…it doesn’t take a genius to figure it out) and they are being offered at prices that are only slightly lower than fair market value for a house in much better shape. Let’s talk honestly here Mr. Bank. You are taking a loss. I get it. Guess what? If you don’t take a bigger loss on that home that is slowly moving in two different directions you’re going to take an even bigger loss when it falls over and you have nothing but a site filled with rubble. Think about it. Let’s get someone in there and get that foundation stabilized. Make it worthwhile for a buyer to step up and put in the work to make it a new home.

The process of buying. I’ve already mentioned how you can Google foreclosure and short sale nightmares and in trying to purchase them with my clients, I have my own stories. I’m not a loss mitigation officer or CEO of a bank, so I don’t know exactly what you go through over there, but let’s find a solution to the time spent on purchasing one of these homes. Streamline it, cut out some of the red tape, know your “bottom line” before you list a short sale…whatever you can do to clean up this process, please do it. Not only will it help you clear your inventory of foreclosed and short sale homes, but it will (gasp) cost you less! Less time will result in less money being spent on each home (and open up your employees to work on other homes). I understand you have to worry about your investment as a bank, but if you sit around hemming and hawing about it, nothing is getting done and you’re not making money. Let’s get these decisions made and move these homes off the market and into the hands of people who want loans (ie, more money into your pockets) and a new home. Stop crying about how much foreclosure costs you – we know it’s not easy, but if we just keep complaining about it and not solving the problem we’re not getting any solutions are we?

photo courtesy of Laenulfean