Pre-foreclosure sales (typically short sales) increased to a three-year high in the first quarter of 2012 even as the average pre-foreclosure sales price reached a record low — making 2012 a prime time to purchase a short sale.
But the process of buying a short sale and the discounts available can vary widely based on the lender/servicer/investor involved in approving the sale. Some banks are approving short sales more often, more quickly and at lower prices than others.
In light of that RealtyTrac has ranked the best major banks to work with when buying short sale homes. These rankings are based on a combination of three factors: year-over-year increase in pre-foreclosure sales for the first quarter; biggest discount on pre-foreclosure sales (compared to the average price of non-foreclosure homes in the first quarter; and the average number of days to sell a short sale (from foreclosure start to sale date).
1. PNC Financial Group
Avg. Pre-Foreclosure Sales Price: $133,015
Avg. Percent Discount: 40%
Avg. Days to Sell: 151
2. Government Entities (Fannie Mae, Freddie Mac and HUD)
Avg. Pre-Foreclosure Sales Price: $127,618
Avg. Percent Discount: 42%
Avg. Days to Sell: 154
3. Ally Financial (Formerly GMAC)
Avg. Pre-Foreclosure Sales Price: $143,410
Avg. Percent Discount: 35%
Avg. Days to Sell: 188
4. Ocwen Financial
Avg. Pre-Foreclosure Sales Price: $126,071
Avg. Percent Discount: 43%
Avg. Days to Sell: 168
5. Sun Trust Banks
Avg. Pre-Foreclosure Sales Price: $151,308
Avg. Percent Discount: 32%
Avg. Days to Sell: 207
6. Bank of New York Mellon
Avg. Pre-Foreclosure Sales Price: $155,488
Avg. Percent Discount: 30%
Avg. Days to Sell: 283
7. Bank of America
Avg. Pre-Foreclosure Sales Price: $166,389
Avg. Percent Discount: 25%
Avg. Days to Sell: 223
Shifting From REOs to Short Sales
Agents and other local experts are noticing that banks are shifting away from sales of foreclosed (REO) homes in favor of pre-foreclosure short sales.
“We’re seeing a shift in the market. I closed 10 short sales last year. This year, I’m on track to do 100 short sales,” said Ben Hirsh, broker/owner of Hirsh Real Estate Specialists in the affluent Buckhead district in Atlanta.
Banks are speeding up short sales after settling the robo-signing debacle, said Hirsh, noting that lenders are offering distressed sellers monetary incentives for short sales. He added that lenders make more money selling short sales rather than REO sales.
In Miami, former hedge fund manager turned real estate investor Carlos A. Guajardo of Maynada Capital Advisors, also is seeing the shift.
“The big change here in Miami is that we are moving out of REO and into short sales,” said Guajardo, who said he owns a portfolio of 130 rental properties in south Miami, many purchased as foreclosures.
Advice for Short Sale Buyers and Investors
Short sale specialist David Dufresne, broker and CEO at Solutions For Short Sales, Inc., in San Ramon, Calif., cautioned that not all lenders in every situation are opting for short sales if they don’t think it’s in their best interest.
“Second lien holders like PNC/Etrade/Greentree are forcing homes to foreclosure regardless if they are purchase money or not by asking for large cash contributions often unattainable,” he said, noting that purchase money loans are non-recourse in California, meaning lenders cannot go after the borrower for any amount of the loan not recouped by the foreclosure.
In addition, Dufresne warned that entities such as Freddie Mac, Fannie Mae and the California Housing Finance Agency (CALHFA) are “clamping down on hardships,” and allowing properties to go to foreclosure rather than approving a short sale if the borrower cannot show what they consider a valid hardship situation.
“Buyers and investors should interview the selling agent before writing an offer on any short sale to make sure that the agent understands how to structure a short sale offer for approval,” Dufresne said. “Agents that are un-knowledgeable or inflexible in the structuring of offers often fail their clients.”
Short sales increased 25 percent in the first quarter of 2012, with average discounts of 21 percent. Sign up for a free trial for full access to short sale bargains nationwide.