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How Banks Goof Up When Pricing Sacramento Short Sales
As a general rule, short sale banks don’t take condition of the home into consideration when pricing Sacramento short sales. I don’t know why, either, because it doesn’t make a lot of sense. You can try to sell a home that suffers from deferred maintenance and maybe it needs a new roof or HVAC system, repairs that could cost upwards of $10,000, and yet the bank won’t consider deducting those costs as an adjustment to market value.
To a short sale bank, all homes in Sacramento are exactly the same when they are similar in age, square footage and layout. In fact, to a short sale bank, even a two-story home is the same as a one-story home. These facts are also a reason why banks are not in the real estate business, because they don’t really understand the real estate business. The bank doesn’t care if the home down the street sold for $20,000 more than your home is worth because that home has a brand new pool, and your home does not. The bank will think you should be able to sell your home for the same price.
This is also one of the reasons why the banking system got into such trouble and hot water in the first place. You would think that a requisite to lending hundreds of thousands of dollars would be a basic understanding of real estate principles, but I haven’t seen that to be the case.
Valuation problems have always been a stickler in a short sale. I know that when I list a short sale that needs work or repairs, it will be difficult to get the bank onboard to sell it. It doesn’t mean it won’t sell or that eventually some poor fool won’t stumble along and pay more than the home is worth, because sooner or later, anything will sell. If it doesn’t rot first. Banks are in no rush. This Sacramento short sale agent can wait as long as they can wait, maybe longer. I will continue to fight for my sellers.
This morning a bank out of Chicago sent an email and asked me to send all offers we receive to the bank. They’ve got to be kidding. No, on second thought, they probably are not. But that doesn’t mean they are getting all offers. That’s between the seller, the buyer and the agents involved. Once we receive an offer that is acceptable to all parties, you can betcha, we’ll send it to the bank.
Sacramento Mortgage Lenders Can’t Perform
Why can’t Sacramento mortgage lenders close escrow? Almost every single escrow nowadays has some loan delay that causes a Sacramento home buyer not to close. But just because everybody is doing it doesn’t make it right. Why can’t home buyers close escrow? Because their lenders can’t perform. If you’re looking for a mortgage lender to finance a home in Sacramento, I’d say an important question to ask is can they promise — can they guarantee — that you will be able to close escrow in this century? Get a timeframe and hold them accountable. This is the big white elephant in the room that everybody seems to be ignoring — lenders who can’t perform.
You know what happens when a mortgage lender can’t perform? They come knocking on the door, whimpering like a dog, holding their tails between their legs and begging: Please sir, will you extend our escrow? Sometimes that answer is NO. Especially in a seller’s market like the real estate market we have in Sacramento at the moment. Sellers get tired of waiting for buyers to close. It’s not just seller’s remorse. Sellers can and will cancel your escrow if you can’t close on time. Sellers might decide they’d rather wait until spring, when maybe prices will go up even further.
If you’re trying to close a Sacramento short sale, it’s even worse. It’s not just the seller who might refuse to extend, it’s also the seller’s short sale bank. Banks are refusing to provide a short sale extension. Those short sale approval letters contain an expiration date. If the bank will agree to extend, the bank might charge the buyer $100 or so a day for that extension. It’s a no-win situation for that first-time home buyer. It doesn’t matter what the contract says, that verbiage won’t save you. It matters how long the short sale bank will give a buyer to close, and that timeframe governs your transaction.
Perhaps a bigger question is why can’t mortgage lenders close escrow on time for today’s home buyers? What is the problem? It’s not like the banks are overwhelmed with business because there aren’t that many buyers in escrow. We have very low inventory — we have fewer than 1,600 homes for sale in Sacramento County. Interest rates are low, but they’ve been low for months and months. Yeah, loan restrictions have tightened, but we’ve been jumping through hoops for a long time. Nothing has changed overnight. I propose that banks are swamped because they refuse to hire enough people to get the job done. They’ve made so many cutbacks in personnel during the downturn that they’ve gotten used to thin payrolls. Cheapskates.
Perhaps there is some little old lady sitting in a dark room with a single light bulb dangling from the ceiling over her desk. This little old lady is working on your file. She looks at her watch. Stops working. Oh, my goodness, deary me, it’s time to go to Starbucks. She leaves. And she doesn’t come back for a few days, and nobody cares.
It’s no big secret why home sellers in Sacramento prefer a cash offer over a financed offer. The performance in underwriting is pathetic. Totally sucks. Big banks, little banks, makes no difference.
The solution: If you’ve got a choice in choosing a mortgage lender, stay local. Pick a person you can grab by the shirt collar and shake a little bit. And get that guarantee upfront that your file will be processed in a timely manner or you might not be buying a home in Sacramento.
About Digital Signatures for Short Sale Banks
It’s not just short sale banks that don’t like digital signatures. It’s pretty much all banks, except the government. It’s hard to believe that here we are in the fourth quarter of 2012 and short sale banks are refusing to accept digital signatures on a purchase contract or any legal documents. Yeah, yeah, yeah, we have a lot of fraud and crooks, and it’s hard to control every aspect of a transaction — to filter out the possibility of mortgage fraud, but give us a break. If we wanted to forge signatures, I suppose it’s pretty easy to do.
Real estate clients love DocuSign, which is the digital service this Sacramento agent uses to put deals together. They can check their email for the notification from DocuSign. Then, they click on the link in the email which takes them to the DocuSign website where their document is awaiting perusal and signature. They choose a signature they like and they adopt that signature by clicking on it. Every place in the purchase offer that requires an initial or a signature, they just click. It’s like magic. The initial and / or signature is applied right there on their monitor. It doesn’t get any easier.
After the purchase offer is executed by all of the buyers and the listing agent, the digital service sends a completed copy to all parties. This process saves a ton of trees. It’s all electronic. It makes sense to do business this way.
Yet, the short sale banks won’t accept a digital signature. Nope, they make you print it out, sign and initial with an ink pen, and then fax the documents so they can more easily lose those documents. You would think the fax number would at least be an efax number so the documents would go to an email account, but no. They go to an old-fashioned fax machine and fall out all over the floor, where somebody walks by, kicks them, sends them scattered, until the night cleaning crew shows up to sweep them into the trash. This is how we do business at the big banks.
Even the government, like Fannie Mae and Freddie Mac, accepts digital signatures. Why can’t the short sale banks?
