Banks are taking a more aggressive approach to selling homes in Pierce County short sales, a Washington short sale negotiating firm said today.
Short sales in the third quarter in Pierce County were at their highest level since the Northwest Multiple Listing Service began tracking distressed property in April 2009, reports Washington Property Solutions.
A short sale is one in which the proceeds from the sale of a home fall short of paying off the debt on the property. In a typical short sale, the bank holding the mortgage agrees to accept the sale proceeds as payment for the debt owing.
Short sales are typically conducted by the homeowner in lieu of foreclosure with the bank’s approval.
While short sales hit a record in Pierce County, sales of bank-owned property posted their lowest level in two years, said the firm.
Short sales in Pierce County increased year over year from 11 percent of all home sales in the third quarter of 2011 to 18 percent in the third quarter of 2012. Short sales also increased in King, Snohomish and Kitsap counties.
Bank-owned sales fell from 35 percent of all home sales in Pierce County in the third quarter of 2011 to 20 percent of all sales in the third quarter of 2012. Bank-owned sales also dropped significantly in King, Snohomish and Kitsap counties.
The shift reflects some major changes in the way lenders are handling distressed properties, explained Richard Eastern, chief executive officer of Washington Property Solutions.
“In the eight years I’ve been negotiating short sales I have never seen banks so eager to make short sales happen,” said Eastern. “Lenders are drowning in bank-owned inventory and they are doing everything they can to avoid adding more distressed properties to their portfolio.”
One strategy is to pay homeowners to sell their homes short rather than go through foreclosure. Two of the nation’s largest banks, Chase and Bank of America, have been paying significant cash incentives to short sale sellers at closing, the short sales company said.
“In the past few months we’ve had clients receive cash incentives that range from $23,000 to $35,000,” said Eastern. “One homeowner whose property sold for $164,000 received a $25,000 incentive from Chase, plus an additional $3000 from the federal government’s Home Affordable Foreclosure Alternatives Program.”
In addition to providing incentives, banks are streamlining what historically been a slow process, said Eastern. They are also more likely to forgive the debt on both first and second mortgages.
Short sales and the sales of bank-owned properties combined accounted for 38 percent of all home sales in Pierce County in the third quarter. That figure was down from 45 percent of all home sales in the third quarter of 2011. King, Snohomish and Kitsap counties also showed overall declines.