Bill Joyce (otherwise known as Sacramento Bill) sent me a link to his full short sale speech after having spotted this reference to it here about a week ago. Here it is:

The seller isn’t the seller. The banks and investors are the parties in charge.

A short sale is a negotiation between borrower and lender (or lenders) and the buyer plays a minor and expendable role. A short sale is about mitigating the loss of a non performing asset (the loan). The sale of the home is one piece of the puzzle. Customer satisfaction and keeping the buyer happy are not priorities in loss mitigation. In fact, I’m not even sure they are considerations.

The buyer & buyer’s agent are isolated from the true authority (Banks/investors) to negotiate, or problem solve. As a result, the buyer is essentially along for the ride and success is based on the seller’s circumstances, skills of the seller’s agent and the willingness of the banks and investors. All out of the buyers control.

The failure rate is high… the odds are, after many months, a home will not be sold as a short sale. While the success rate has been upgraded from horrible to bad, the odds are still against a buyer having a successful short sale purchase.

There is not a great process in place with banks. Call centers are overwhelmed with high call volumes. There are typically multiple banks and investors each with their own and often changing objectives. Combined with an apparent low motivation to complete any particular short sale, you can expect documents to be lost, files get closed without notice and what will feel like an unlimited variety of absurd hurdles. Muddling through best describes the typical short sale.

The seller is in a bad place financially and emotionally. The seller would probably jump at the chance to get the price the buyer is getting and stay in their home. Don’t expect the seller to behave like a typical seller profiting from the sale of their home. Don’t expect gratitude from the seller.

It isn’t all doom and gloom for the potential (if unlikely) short sale buyer, however, as there are a number of things that they can do to better prepare themselves for what’s ahead.

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[Moving forward to 2006 when the stresses and strains really began to show for the nation's housing market, this item, originally published on June 7th, 2006, came around the time when the phrase "upside down" was first starting to be heard in reference to houses. It's a bit odd to have come across this one today, after our recent experience detailed here.]

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If you lived in California about fifteen years ago you probably remember short sales – it looks like they’re about to make a comeback. A report from Sacramento this week sounds eerily similar to the 1990-1996 California real estate bust, except home prices are multiples of what they were back then.

The possibility of a short sale arises when you need to sell your house, but you owe more than it’s worth – like a fully-financed new car being driven off the dealer’s lot, you are “upside-down” on your loan. That’s a phrase we might be hearing a lot more of in the years ahead – “upside-down”.

With home prices apparently falling in Sacramento after a phenomenal run-up in recent years, many of those who purchased real estate at last summer’s peak and put little or no money down, today owe more than their home will fetch in a real estate market now crowded with inventory.

If, for one reason or another, these homeowners must sell, then they are faced with a few choices, none of which are very appealing:

1. Sell the house, and pay the difference to the lender
2. Walk away, and give the house back to the lender
3. Make a deal with the lender to accept less than the loan amount

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