Courtesy of The Palm Beach Post, comes some fresh news for Florida, offering up to $20,000 to short sale vs. foreclosure.

The limited time offer has received little promotion from the Charlotte, N.C.-based bank, which sent emails to select Florida Realtors earlier this week outlining basic details of the plan.

Only homeowners whose short sales are submitted for approval to Bank of America before Nov. 30 will qualify. The homes must have no offers on them already and the closing must occur before Aug. 31, 2012.

This signals, in our opinion, the pressure they are feeling in Florida as the housing market continues to languish and the continued pressure to clear up these loans that are facing imminent foreclosure. Other interesting facts in the article include the fact that the current foreclosure timeline is almost 676 days – almost two years!

“I think this is a positive sign that the bank is being creative to try and help homeowners and get things moving,” said Paul Baltrun, who works with real estate and mortgages at the Law Office of Paul A. Krasker in West Palm Beach. “With real estate attorneys handling these cases, you’re talking two, three, four years before there’s going to be a resolution in a foreclosure.”

Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance, called the short sale payout a “bribe.”

“You can call it a relocation fee, but it’s basically a bribe to make sure the borrower leaves the house in good condition and in an orderly fashion,” Cecala said. “It makes good business sense considering you may have to put $20,000 into a foreclosed home to fix it up.”

Bank of America says that if the program shows promise in Florida, it could be expanded to other states. Other companies, including Wells Fargo and J.P. Morgan Chase also have similar programs.

More details:

Bank of America’s plan excludes Ginnie Mae, Federal Housing Administration and VA loans.

Similar to the federal Home Affordable Foreclosure Alternatives program, or HAFA, which offers $3,000 in relocation assistance, the Bank of America program may also waive a homeowner’s deficiency judgment at closing.

A deficiency judgment in a short sale is basically the difference between what the house sells for and what is still owed on the loan.

HAFA, which began in April 2010, has seen limited success with just 15,531 short sales completed nationwide through August.

In our opinion, this is just again a math decision a bank makes that falls in line with the bank’s decision. How does the bank minimize their lost? Short sale with a $20k kicker; or something else?

Post your thoughts in the comments!

Pretty interesting find over at The Big Picture, detailing how to use Google Maps to find foreclosures:

Google Maps keeps evolving, expanding the ability to drill down into granular detail. The latest updated trick? Mapping foreclosures for sale.

Our friends at Chart Porn — a blog that got its name from one of our posts (honest!) — remind us of this, with a step-by-step lesson of how to use Google maps:

Google Maps Foreclosure Listings

1. Punch in any US address into Google Maps.

2. Your options are Earth, Satellite, Map, Traffic and . . . More. (Select “More”)

3. The drop down menu gives you a check box option for “Real Estate.”

4. The left column will give you several options (You may have to select “Show Options”)

5. Check the box marked “Foreclosure.”

I wanted to demonstrate the full extent of Foreclosures in the US, so after setting GMaps on foreclosure listings, I slowly zoomed out of the map. Voila! Most foreclosures that are for sale in the USA are now showing on your screen.

Note: This map does not reveal any of the millions of REOs that have already been sold by the banks that hold them.

But the maps do reveal an entire nation littered with foreclosure sales. It is an ugly and graphic depiction of how much inventory is out there, and why housing is stillmany years away from being healthy.

Take a look at this example from Las Vegas:

Unfortunately, it can’t help you find underwater homeowners (you are better off reading our blog post on keeping your pipeline full of short sale leads for that) but it’s still quite an interesting look and when you view the map nationwide, you can see the trouble areas of the country pretty easily.

New home sales dropped to an annual pace of just 283,000, according to the Commerce Department. That was down 8.1% from a slow September and 28.5% from 12 months ago when the annualized sales rate was at 430,000.

Sales are off nearly 80% from the housing boom peak pace of 1.4 million, set in July 2005. Sales have remained near historic lows this year despite very attractive mortgage interest rates that slash the monthly costs of homeownership.

The Commerce Department also revised August sales figures downward to 275,000, which represents the record low point for new homes sales since it started tracking figures in 1963.

There’s a major factor depressing home sales of all kinds, according to David Crowe, chief economist for the National Association of Home Builders.

This likely has partially to do as well with the expiration of the homeowner tax credit. Many economists were predicting a rebound in the near future but this news puts the housing market in worse condition than anyone anticipate; which in turn means that loan modifications, short sales, and foreclosures will continue to play an enormous influence as people continue to remain underwater on their homes.

“So much bargain-priced, ‘used’ home inventory is available that the builders just can’t compete,” he said. “Over time, we’ll work through that mountain of existing home supply. But the key words are ‘over time.’ New home builders won’t have much to be thankful about any time soon.

The median price for existing homes sold in October was just $170,000, compared with $194,900 for new homes. That’s the lowest median price for new homes sold in seven years and down 13.9% from September.

The enormous inventory, coupled with continued downward price pressure (although we do believe the bottom is somewhere nearby!) means you need to make sure when making your short sale pitches to the banks you mention the status of the economy and the recovery that seems so distant in the future.

Crowe said that indicates many of the buyers were first timers. They’re less constrained than older potential buyers because they don’t have to worry about selling their existing homes in order to purchase new ones. One light at the tunnel, however, is a slightly shrinking inventory:

One encouraging aspect of the report for home builders is that inventory continued to wane. The number of new homes for sale at the end of October was about 202,000, less than nine months’ supply at the current rate of sales. The number of homes on the market has dropped about 20% since October 2009.

As we have been saying for some time, we think there is at least 3 – 4 more years of strong short sale potential in the marketplace. Conflicting information about economic recovery makes us believe that the optimism about rebounding home prices is, well, a little too optimistic.

What are your thoughts? Post ‘em in the comments!

An article published on 10/19 by the Herald in southwest Florida discusses the growth of short sales as a result of the recent moratorium on foreclosures by several lenders, citing:

Short sales are in vogue in Southwest Florida, a direct result of the broad halt on foreclosures imposed by some of the nation’s largest lenders.

There is some indication that the logjam might be clearing, with Bank of America announcing Monday that it plans to resume seizing more than 100,000 homes in 23 states next week.

But the halt by the big Charlotte, N.C.-based lender, Ally Financial Inc. and JPMorgan Chase already has been felt in Manatee, Sarasota and Charlotte counties, a region where distressed property now accounts for about 50 percent of sales.

Realtors have lost sales, and some homeowners who had closed on a bank-owned property have been left in limbo.

But one positive is that lenders have ramped up short sales — where a bank accepts a sale for less than what is owed on a property — to get them off their books and to avoid additional foreclosures being snared in a mess that is rooted in questions of flawed documents.

It’s in this foreclosure stall that the lenders attempt to get rid of properties before they make it that far in the process – i.e. before foreclosure. This is positive news for the banks, although we still find it unbelievable that the banks did such a poor job auditing their foreclosure process that they literally had to stop processing them while they lined their ducks up in a row.

“It’s a total 180 by the banks,” said Matt Augustyniak of Bradenton’s Horizon Realty, which also offers title and mortgage services. “Banks feel they have no other options and they have to get this stuff off their books ASAP.”

The question for short sale professionals is; does this adjust the bank’s motivations for a short sale? We think it does provide  abit more incentive to clear them up sooner – but on the flip side; also means there will be more attention paid to the value proposition a short sale offer presents. This means it is more critical than ever to provide an ironclad short sale package and bulletproof documentation – don’t give the bank any reason to dismiss your offer!

A short sale initiated two weeks ago was completed from offer to closing in six days, he said. Just prior to the foreclosure halt, Horizon had been wrapping up short sales that had started in the spring.

That probably belongs in the Guiness Book of Records!A prediction by a realtor in Florida related to her market:

It will take at least six months for the cloud over foreclosures to fully lift and that short sales will be all the rage during that time.

For those specializing in foreclosures, the freeze has meant lost business.

Drew Peterson, a sales agent with Sarasota’s Re/Max Alliance Group, already has lost one sale and half his business is on hold.

“I could complain, but I think it’s a good thing because it will put in tighter controls,” Peterson said. “The banks’ main concern is selling these properties and getting them off their books, and I’ve been hearing from my bank contacts that they are shifting resources to short sales while the moratorium is on.”

A bigger concern is the ripple effect of the moratorium. Our bets are that the situation in Florida is replicated across the nation, especially in those heavy hit areas like California and Nevada.

But others worry that even if the foreclosure process starts grinding away again, the delays caused by banks’ review could have a profound impact in Florida, a state whose economy is so reliant on real estate.

“It will have a ripple effect into all of the businesses that rely on real estate and may increase the unemployment rate, which may in turn increase the number of foreclosures,” said Daren Blomquist, a spokesman for California-based RealtyTrac Inc., which tracks the foreclosure phenomenon. “This adds a whole new cloud of uncertainty to the housing market.”

It sure is an interesting time in the market. What are your thoughts on the article? Do you think short sales will experience a bounce because of this foreclosure stall and “blip”; or will REO and non REO delinquent properties maintain similar proportions for the foreseeable future?

Everyone knows that a good short sale professional needs to have leads to be productive. That means that part of your workload needs to include finding new opportunities and getting your name out there. It doesn’t matter if you are a short sale investor or agent; without leads you have no work!

There are two major methods to finding leads, passive and active. We will describe each type and then give examples of what you can do in each category (and you should be using both methods!)

Don’t underestimate the effort involved with finding leads. Some of our members report spending almost 50% of their working time just working on building leads and their pipeline! Remember that marketing  is is a curve; especially as you are starting out and building a name for yourself, it can take a lot of effort to build your reputation, but it is a snowball effect, so keep pushing! The most successful short sale professionals use a combination of tactics to keep leads coming in 24 hours per day!

Passive Short Sale Lead Finding

No, passive does not mean you don’t do anything at all! What it means is that you build systems where the leads come to you. This is a great system, and once setup, can drive business to you without needing too much additional upkeep and effort when compared to Active lead finding. There are a lot of ways that you can find short sale leads passively!

Maintaining a Short Sale Blog

Keeping a blog is a great way to get traffic and get your name out there. The National Association of Realtors has said that almost 9 out of 10 individuals use the Internet to research their home options. But it does take time and effort! All Short Sale Artisan users get a free WordPress blog that can be customized and used with their own domain name.

Using a blog for short sale leads is more than simply creating it, as we alluded to earlier. You need to post content. You can easily find content by searching Google News, other blogs, or writing opinion pieces. Be sure to use keywords from your local area to target local investors – for example, a headline could be “How to Handle a Short Sale in Las Vegas, Nevada!”.

Make it a part of your routine to regularly post content on your blog to keep it active, and encourage comments and networking. You should write at least a post per month at the absolute minimum (preferably one per week). A typical post should take you no more than 2 hours to write, proof, and put out there, and it helps you establish credibility as well.

Syndicating your Blog Content

Don’t keep your blog on your site – get the word out there! There are a few ways you can syndicate your blog content. One way is by submitting your blog using your blogs RSS feed – this RSS feed is a special URL that can be used to automatically feed updates of your site out into the Internet. You should also install plugins to your blog to automatically post your short sale content to Twitter, Facebook, and other social networking accounts.

You can also manually copy your blog content onto various sites that allow you to post blogs, including sites like ActiveRain, BiggerPockets, and RealTown.

One final thing you can do is author articles on authoring sites – such as eZine articles. Another benefit of syndicating your short sale content is that all these link to your blog and increase traffic to your site, which in turn builds awareness of your services and products.

Twitter

Twitter lets you push out your short sale tips in small fashion. Start by interacting with the vibrant short sale community that exists on Twitter. This will also help build a reputation for you. Find other people’s blog posts through Twitter and comment on them. It’s important as well to build followers on twitter, and there are several automated tools that will post relevant content to your twitter account on a regular basis, like Twitterfeed.

Facebook

If you don’t know about Facebook, you have been living under a rock. Using Facebook for short sale lead finding can be very useful – Start by setting up a “page” for your business and branding it. Encourage people you have worked with before to become a fan and post relevant information frequently. Remember, blatant advertising is often a turn-off in social networking, so be sure to give some good tips and advice, for free, interspersed with mentions of your services that you provide.

Word of mouth

Meet people! Visit your local chamber of commerce. Hand out business cards. Encourage people you have worked with to spread the word about your services. The Referral Engine for short sale leads is one of the best ways to keep business coming in – but it relies heavily on your clients having had a stellar experience with your services, so make sure you deliver!

Seminars / Conferences

A great way to meet people with whom partnerships can be formed is seminars and conferences. These occur at real estate and short sale conferences nationwide. There are local chapters nationwide of the Real Estate Investing Associations (REIA), Real Estate Agent conferences, and more. Find them, attend, and be liberal with your business card! If you are an investor, you will want to meet with lots of realtors who you can work with. For agents, you will want to meet with other agents and talk about their lead generating strategies. Networking in general is a great way to build your influence and seminars and conferences feature like-minded individuals in the same industry.

LinkedIn

Similar to Facebook, create your company (if you are self-employed) on LinkedIn and promote it!

Finding Partners

This doesn’t mean splitting your work. It means partners to do portions of the work. For example, an investor may partner with a real estate agent, or a real estate agent may partner with a short sale attorney. If you find a person that has been a pleasure to work with, keep the relationship thriving and they will think of you when opportunities arise that they are made aware of.  It is very similar to the referral engine from past clients in this regard.

Media Exposure

If you are a knowledge expert, pitch to the local news agencies. Foreclosures and the short sale market are in hot demand right now; and local news loves to hear from people involved in the industry to pitch their ideas and commentary. Another benefit of media exposure is that it also creates trust in your operation, which is very useful in an industry that certainly has its fair share of scam artists.

YouTube / Video Sites

Putting your mug up on YouTube or Vimeo is a great way to get your name out there. An example of two guys who have had good success with this is Group 46:10, who provides short sale training.

Active Short Sale Lead Finding

Active short sale lead finding means actively pursuing those who are in default. This is a tried and true method, but requires constant attention and pressure. Temporarily halting your efforts also temporarily halts any results or leads you may find from these methods!

Most of these methods involve scouring sources for potential leads and then actively following up on them. The benefit to this method is that you are targeting people who are in need directly; as opposed to blanket passive marketing where you hope someone will find you or be referred to you. This is more of the traditional “sales” types of activities.

Direct Mail

A tried and true short sale lead generating method. Sending direct mail to homeowners who are behind on their mortgages simply works. Short Sale Artisan sells leads to its members at discounted rates for homeowners in a given area who are behind on their loan payments by 30, 60, or 90 days but have not yet received a Notice of Default. These are prime candidates for a short sale, as they are behind on their payments but have not entered public record yet as being behind on their mortgages.

There are many methods of handling direct mail, but generally the suggested process is:

1. Identify who you will send our mail campaigns too (using pre-NOD lists is the best method)
2. Send out a first round of letters informing the service (Short Sale Artisan has full templates for all these docs in our Template Library!)
3. After a certain amount of time, send out a follow-up letter reminding them of the services you offer
4. After a period of time, send out a final third letter

It has been generally proven that going beyond a 3rd letter is unnecessary and wasteful. It does take time to build and manage these mail campaigns, but they nearly always result in new work in your pipeline!

Cold Call / Door Knocking / “Bird Dogging”

Similar to the Direct Mail, this often works but is time intensive. Pre NOD lists your purchase may include phone numbers. Door knocking is even more preferable than cold calling (be sure to dress for success!), but the disadvantage is time. You can call 15 people in an hour but perhaps only visit 4 or 5 houses on foot. Plus, phone calls can be used to market outside of your geographic area.

Another option on door knocking is “bird dogging”. This is basically outsourcing your door knocking operations to novice short sale investors. Bird dogs will go door knocking for you in return for a commission on any successful closes. The benefit is less time you need to spend going from house to house; but the negative is you lose some of your profit to the bird dog.

“Bandit Signs”

Bandit Signs are the signs you see on telephone poles and street lights around your home town that proclaim “We buy houses cash!”. These have limited success. Additionally, you should be aware of any town ordinances against public advertising – some towns will levy fines if you staple these signs on every streetlight in an area.

The benefit of bandit signs is that they are quick to put up and get you exposure. The call rate is very low, but even a handful of calls can make it very worthwhile if a lucrative opportunity pops up.

MLS Search

The MLS is a great site to find new leads. Search for keywords that are typical of short sale eligible properties, such as “Distressed” or “Quick Sell” or “Motivated Seller”. these are indications that there is a time constraint on the sale of the property. You can search the MLS directly from Short Sale Artisan’s Lead Finder.

Specialty Sites (foreclosure.com)

Foreclosure.com is similar to the MLS except it focuses on foreclosures and, more recently, short sales as well. Foreclosure.com contains REO properties and other distressed properties. The downside is it costs some money to become a member; however they do have a free trial period if you see something of interest.

Craigslist / eBay

Other searchable sites include Craigslist and eBay. On Craigslist, you can also post your services directly. eBay has a properties section, and similar to the MLS, you will want to search for keywords that correspond with short sales, like “distressed” and so on.

Keep it up!

Remember, marketing is not a one – time job. Finding leads takes a considerable amount of time – so build a system and a process in place where you utilize all the marketing channels effectively.The best marketers use a variety of methods and integrate them cleanly – for example, new blog posts are automatically posted on Facebook and tweeted on Twitter.

Do you have any tips of additional ways to find Short Sale Leads? We’d love to hear about them in the comments!

More market news about short sales Courtesy of The Signal, in California. The title of this article is, “Short Sales Hamper Market”, and it’s an interesting article because it somehow backwardly blames the housing problems on Short Sales, even though we have shown over and over again that short sales are actually a mitigating factor, a partial solution, to the housing crisis.

The first point they make is that people aren’t buying homes:

Local realtors are met with a persistent problem: People just aren’t buying homes.

The problem is two-fold — there aren’t enough homes on the market, and customers are still wary to buy, local Realtor Andrew Walter said Friday.

I’m betting this is a typo. It probably should have said there are too many homes on the market. Either that, or the author is very confused, as the next sentence goes on to describe how the number of houses on the market have drastically increased:

More than 1,000 homes were on the market in July, up nearly 40 percent over last year, according to a report released by the Southland Regional Association of Realtors [but only] 244 homes changed hands, the report stated.

That’s because the majority of the houses and condominiums on the market were caught up in the lengthy, labyrinthine short-sale process.

Last month, 176 homes were sold, down 25 percent from the same month last year. Another 68 condominiums were sold, a 23-percent drop.

I find it interesting that this article blames the short sale process for flooding the market with houses. The houses and other properties are flooding the market for numerous reasons, but resulting short sales are a downstream effect of the market, not an upstream causation.

We’ve posted some analysis here, but even the HUD’s report itself claims differently. The flood of houses is due to low demand and high inventory. It’s like when Gucci makes too many bags, so they ship them off to the Outlet to get rid of them at bargain prices. The inventory is just too high.

Remember, building a house takes time. Housing starts were outpacing demand, and even when the market started to come down on housing, a lot of developments were still in progress and were finished, even though the buyers had vaporized. It will take time, perhaps years, for construction starts to begin again and for demand to “catch up” to supply.

“These short sales are such a huge, cumbersome, involved, long-term project,” Walter said. “A lot of these homes sit there, and they look like they’re available, or look like they’re pending, and they just go on forever. I’ve got one I’ve been working on for a year.”

“There’s no sense of urgency because people are not quite sure where this is going. They’re like, ‘Well, we’ll see what happens.’”

Again, short sales are challenging (that is why Short Sale Artisan is such a useful tool!). But if the house was not in a pending short sale, it would be in a pending foreclosure. It’s not like the houses would turn around quicker if they were going to foreclosure!

What are your thoughts on the article? Are Short Sales are a part of the problem? Our position is: Quite the contrary!

I always find it amusing when someone thinks they are entitled to a short sale simply because their home is underwater. We have said it over and over again; but this little Q&A blurb from MarketWatch (paraphrased below) explains it very well:

Housing Wire author Cary Steinberg recently wrote an interesting piece on about HAFA and HAMP. The premise of the article is that HAFA (the Home Affordable Foreclosure Alternative) will likely be successful because it is an exit strategy for homeowners, allowing them to sell their house for less than they owe – as opposed to HAMP (the Home Affordable Modification Program), which keeps people in their houses but modifies their payment terms to make payments less of a burden.

We have written plenty of articles here on HAFA and HAMP, and identified plenty of reasons why we think it won’t succeed, but it’s always interesting to revisit what is going on in the housing market, so let’s run through Cary’s article to point out some of what we consider flaws in the argument.

The first point that is made is that homeowners simply do not want to own a home where the balance of their mortgage exceeds the value of the property. In other words, they are underwater.

Say I bought my home in 2006 for $500,000 and put $50,000 down, and I got a loan for $450,000 at 7% for 30 years. I could afford the payment, and I paid on time. Fast forward to 2009. I am not making the bonuses I was in 2006, and my wife’s hours have been cut so our family income is not what it was. It seems that the HAMP program was made for me. Now comes the real question. Do I want to stay in the house? I owe essentially $450,000 on my home. From 2006 through 2009 the value of my home decreased from $500,000 to $240,000. I now owe $450,000 on an asset that is worth $240,000. Even if I were offered a mod to 3% and the term extended to 40 years do I really want continue to pay on a loan when the asset is worth about half of what I owe?

Granted that there are folks that didn’t buy their home as an investment but rather as a homestead. A place they felt they would stay for years to come. Maybe the schools are the best or the home is close to other family members, there are a variety of reasons. Those are the folks who have kept up their modifications through the trial period and into the permanent status. They may continue to pay, but as many areas are still seeing price stagnation and even continued decline, it will be interesting to note what the recidivism rate is on the permanent modifications in a couple of years. Some people started a trial modification because they initially hoped that things would get better and they would stay in the home. Some got on a trial modification simply to buy time. Some people stopped making their payments and it was months before they were offered a solution if they qualified for one.

My first concern he did address: some people buy homes and intend to live in them for a long time. There are plenty of homeowners who are underwater on their home who can afford and do continue to pay their mortgages. As a matter of fact, as of late last year that number was almost 1 in 4 homeowners. The argument that they should walk away has been made by others and is one I strongly disagree with in principle. The oft repeated argument we make here is that short sales when appropriate are a best case solution, but they aren’t always appropriate. Short sales are a lender’s decision to minimize an imminent loss.

Now, in the event of true hardship (which the article points out by reduction in salary), short sales can be a great solution. Maybe there is no reasonable mortgage modification that can be made that would enable a homeowner to still meet their obligations. In that event, a short sale is a great solution – however we have already identified numerous issues with the HAFA program itself that make it seem underwhelming at best. The negative feedback has been consistent. There are also numerous other reasons why the HAFA program was destined to fail, including:

1. The underwhelming results of the overarching HAMP program. As a matter of fact, through January 2010, HAMP had only created a little over 100,000 modifications, despite having promises of reaching 4 million plus struggling homeowners. Remember, the HAMP program was also “mandatory“, but the results still were meager at best.
2. Promises of speeding up the process seems a little bit “pie in the sky”. Even though the 10 day window does not describe the entire process, the loss mitigation departments at the banks are still struggling with being understaffed and overworked.
3. There is no enforcement for not following the guidelines. There are no repercussions (other than consumer complaints) if things take 20, or 30 days, or if the terms aren’t followed as outlined.
4. Financial incentives are low – $1000 incentive payouts aren’t really that much in the scheme of the amount of work involved to process one of these deals. 2nd lienholders in particular can get $3,000, but that’s only marginally more than they are getting today. Since lenders aren’t able to utilize deficiency judgments under HAFA, they also lose the ability to try and collect some of those outstanding amounts. This is important, because lenders often sell these for reduced values to other debt collection firms. Those are tangible assets for a bank that are essentially wiped out.
5. Paperwork standardization – Banks are all using their own short sale packages today. Mix in some of these government HAFA files into the same loop and it’s going to get them even more confuse than they already are.
6. Removing the case-by-case analysis that short sales need: Every short sale transaction is different, and lender should approach them as such. HAFA requires lenders to identify their minimum net proceeds ahead of time, and the guideline requires 120 day period to change that value. This means that if a property falls outside of the minimum net proceeds, it isn’t eligible under HAFA. That’s a shame; because the house is worth what the house is worth, and even in the span of 120 days the criteria used can change. It removes flexibility from the process, which is critical when handling these transactions.

Everything we have seen from users of Short Sale Artisan and in the market in general has indicated that HAFA is taking up a very small percentage of short sales that are going through, and the vast majority are still being handled as they were before HAFA went “live”.  In the end the result will likely be an under performing program just like HAMP and HARP are.

The article continues to discuss the difficulty with the junior lien holder, which we have also discussed here.

Now, there are issues. Although HAFA provides for a little money to go to a junior lien if one exists, insiders are reporting that the juniors are not just rolling over and accepting what the plan calls for. This can delay a deal at best and kill a deal at worst. It is too early to tell what the success rate of the HAFA program will be but I am betting it will be far better than HAMP.

I personally would bet much different – I would say I think it will mirror HAMP in success, which is to say, negligible.

What do you think? Do you agree with the statement that:

HAMP is a band-aid. HAFA is an exit strategy.

We’d love to hear your comments!

Interesting read at CNBC last Friday about banks moving to short sales by Dianna Olick.

Earlier this week a top executive at Bank of America told an REO conference in Dallas that the lender would be focusing more on short sales than ever before.

At first hearing this, I assumed it was because of the government’s Home Affordable Foreclosure Alternative Program, which provides cash incentives to servicers and borrowers for short sales and also streamlines the process, but of course there’s way more to it than that.

Said Bank of America exec, Matt Vernon, whose official title is National REO, Short Sale and Deed in Lieu Executive (his childhood dream title I’m sure), granted me an interview this morning, and was pretty clear as to why B of A is pushing these alternatives.

Interestingly, we had posted an article about Bank of America when they hired Mr. Vernon, and posed the question as to whether we thought this new focus on short sales by Bank of America would relieve some of the pressure on the housing industry in general and more specifically some of the latent frustration investors and real estate agents have had with Bank of America specifically.

“We understand the reality; a large number of homeowners won’t meet the eligibility for the HAMP (the government’s Home Affordable Modification) program,” Vernon says. He also noted the sheer volume of borrowers now coming through the short sale process. He expects to see far more.

We all had our skepticism about HAMP and HAFA, and here is some more icing on the cake coming from the big dog himself about the reality that HAMP eligibility itself outs a large number of otherwise worthwhile short sale candidates.

The big difference, he says, is that BofA, as well as some other big banks, are changing the model from reactive to proactive. In other words, instead of waiting for a borrower or real estate agent to approach the bank with an offer for a short sale, they are using a “cooperative approach, with homeowner, Realtor and servicer on behalf of investor, working to move that property through the process. All three of the interested parties holding everything together,” Vernon explains.

So the servicer sets a minimum value for a short sale and then the borrower and Realtor go out and find a buyer. When they do, the process then moves far more quickly because it’s already approved.

Thankfully. It’s good to see Mr. Vernon continuing on the path he said he would when he took over the flailing Bank of America short sale department.

Which leads me to another report from Clayton Holdings, which finds short sales cut risk severity by 13 percent more than REO sales. And in some states where the foreclosure process is more lengthy, short sale loss severities can be as much as 26 percent lower than REO loss severities.

“I would say that’s generally accurate in what we see,” agrees Vernon. “It really comes down to time. The quicker you can facilitate the property moving.”

This is a great link to keep handy and use when making the case to the bank about your short sale. Again more validation that the short sales process does in fact save time, energy, and ultimately mitigates the bank’s risks significantly.

The good news is, that will cut down on foreclosures. The bad news is that short sales, like it or not, are comps. They sell for less, and consequently bring down the values of properties around them.

As we have said over and over; a short sale isn’t the best outcome, but is the ideal solution in the right scenario. A homeowner going into foreclosure is worse than a short sale!

What are your thoughts? Post ‘em in the comments!

Good to see some of the news media recognize the hand investors have in alleviating some of the pressure of the housing crisis.

Still, real-estate experts working inside and outside the investment community agreed that investor interest in the Valley real-estate market has helped to prevent communities in 2009 from being overtaken by boarded-up, crime-friendly vacant homes.

“We’d be in a disaster area without the independent investor in today’s real-estate market,” said Alan Langston, who runs an information-exchange service for investors in Arizona.

The housing market certainly is an interesting beast; but investors, especially in pre-foreclosure properties, are one of the keys to turning around the housing market by removing underwater properties from the bank’s books and giving them new life. The housing market may or may not be at the bottom yet; but you can bet there are investors riding the train both directions, up or down. Being successful revolves around knowing which cards to play at what time.

We’ve said it before, but creativity in the real estate industry is critical: One investor is building a company that creates homeowner / investor partnerships as a creative solution to keeping the home:

Dave Dziedzic, owner and designated broker of RealCore Realty International in Phoenix, said he was launching a program called Housing Angels that would create partnerships between investors and homeowner-occupants.

It could help those destined for foreclosure to keep their homes by short-selling them to investors, leasing back the homes for a few years and then buying them back at a much lower price, Dziedzic said.

The program is still untried in Arizona and could run into resistance from the banks, he said.

Dziedzic and others working with investors said they have taken on a vital role in stabilizing the housing market, by fixing up blighted properties that traditional lenders don’t want to deal with and first-time homebuyers don’t have the cash to pay for in advance.

One of Dziedzic’s employees, Jeff Dicks of Avondale, said he is counting on the new angel-investor program to help him keep his home.

“I said, ‘Dave, I need an angel,’ ” said Dicks, who like many Valley residents has taken a significant pay cut during the past year.

And of course the role of Short Sales in particular;

There has been a rapid rise in short-sale transactions in which homeowners in default on their mortgage avoid foreclosure by getting the lender’s permission to sell the home for less than their loan’s outstanding balance.

The short-sale process, which can be time-consuming and often requires the consent of multiple moneylenders, has become widespread despite initial reluctance by lenders, homeowners, buyers and sellers to embrace it.

Langston, executive director of the Arizona Real Estate Investors Association, based in Tempe, said a number of recent developments have slowed the rate of lender foreclosure in recent months, which has reduced the number of listings that might appeal to an investor.

One factor is the rise in short sales, which have replaced about 25 percent of the foreclosures banks were initiating a year ago, he said. Langston said many investors don’t want to get involved in short sales because of their reputation for being lengthy and unreliable, but that widespread adoption of the short-sale process is making them almost unavoidable.

Again, adoption of what is the reality of the real estate market is key. Sure, many investors may not want to deal with short sales; but develop a system for managing your workload and they can be tremendously lucrative.

What are your thoughts? We’d love to hear from you about your creativity in the housing crisis!