California real estate agents believe foreclosure alternatives should be easier. In an open letter published in as many as seven major California newspapers, the California Association of Realtors (CAR) pleaded its case for a more simplified, standardized short sale process.
According to the letter, 640,000 California residents have lost their homes in the past two years, and 30% of current homeowners in the state owe more than their homes are worth. A short sale is one alternative available for homeowners struggling to keep up with mortgage payments. It is a process in which the lender permits the borrower to sell the home for less than they owe, but the process has been crippled by a complex and often convoluted system.
For a short sale to work, the borrower has to convince the lender and often the investor as well, in cases involving second mortgages. Each mortgage agreement is unique with its own set of clauses, making it difficult to produce a clear and succinct process. As a result, 3 out of 5 short sale negotiations end in failure.
“Poor and slow service by many banks and servicers has only exacerbated the problem. Horror stories abound from potential homebuyers and REALTORS® forced to wait 90 or more days for a response to a purchase offer or being required to fax short sale applications or other paperwork as many as 50 times.”
CAR, which represents 170,000 real estate professionals in California, is pushing for regulators to streamline the process in which banks approve short sales, something many real estate agents believe is often the best solution for both struggling homeowners and the lending institutions. The organization is currently in talks with U.S. Treasury officials and major banks to create a more standardized process for short sales.