Is It Really a Short Sale?
Southfield-based Woodward Asset Capital raises relevant questions about whether some short sales aren’t really simply for-sales.
SOUTHFIELD, Mich. – When is a short sale not a short sale?
When the sale price is more than enough to cover the outstanding mortgage balance.
With proper technology in place, loss mitigators are finding that some short sales actually aren’t short sales at all.
Call it the housing industry’s attempt to fit a square peg into a round hole, but time and time again, Woodward Asset Capital, through its web-based technology solution VerifiedShortSale, is finding that what is presented as a short sale turns out to be nothing of the sort once the bank is able to see every offer for a particular asset.
“Short sales are a less expensive resolution on a delinquent loan than a foreclosure or deed-in-lieu, but more and more often we’re finding that arms-length offers on listed short sale properties can eliminate ‘underwater’ sales,” says Ronald Jasgur, WAC president. “The traditional short sale process is terribly inefficient and fatally flawed, because the bank can only react to the one contract that the borrower and listing agent has asked it to approve.”
Since 2009, Woodward’s systems have processed more than $15,000,000,000 worth of offers, at an average of almost 6 offers per property. 34% of all listings sell above the bank’s approved list price. More than ever, when markets are improving, it’s imperative for a servicer to learn what they don’t know.
VerifiedShortSale puts the servicer first in line to see every offer in the local market for a particular asset, not just the one offer accepted by the seller. Accordingly, fraud and flopping is prevented while sale prices climb and recoveries are improved.
“Knowing about all the activity on the street puts the bank in position to know exactly what an asset is worth right now. Even the best appraisals and BPOs can’t identify true market value, they can only estimate a value based on recent history, and that’s not good enough,” says Jasgur.
“Even if a short sale isn’t possible, what buyers in the market are willing to pay for a specific property today is the most important piece of information the bank can ever have, especially if foreclosure is the next step,” he says. “It prevents a costly overbid at foreclosure sale or gets expectations in line up-front when a property moves to REO, which saves marketing time and limits exposure to further loss.”
More importantly, knowing what the market is truly willing to pay resolves those discrepancies where the bank or investor believes an asset is worth significantly more than the market will pay.
“If the appraisal and BPO say $200,000 but a dozen offers suggest a property is only worth $150,000, I contend the property is worth only $150,000 today. And certainly it’s better to know that now rather find out as an REO 6 months later,” says Jasgur.
Leading mortgage data analytics provider Core Logic estimates that short sale fraud cost the industry $375 million in 2011, and short sale volumes increased significantly in 2012. Jasgur thinks that’s just the tip of the iceberg.
“Short sale fraud is hard to uncover unless there is a subsequent sale of the property in a short period of time,” says Jasgur. “When the borrower and listing agent rig the transaction to keep the borrower in the home via a non-arm’s length transaction it isn’t picked up.”
“There are great agents out there that understand that their role in the short sale process doesn’t preclude them from fiduciary responsibilities to their seller, which includes the need to best mitigate potential loss for the lender.” says Jasgur. “Without VerifiedShortSale, the servicer can never truly know whether the offer they’re reviewing is the first offer, the best offer or the worst offer. It is crazy for anyone to approve a short sale without knowing what the borrower knows.”
Since the market crashed in 2007, Woodward Asset Capital has been providing solutions that close gaps in the process of real estate sales, while reducing risk, preventing fraud and ensuring compliance with federal regulations. Its web-based products, OfferSubmission.com and VerifiedShortSale.com, use flexible, rules-based engines that work in concert with enterprise servicing and asset management systems with ease. VerifiedShortSale was awarded Release of the Year for 2012 by Mortgage Technology Magazine.
Woodward has just released Purchase Pipeline, a web-based acquisition and transaction management system for institutional investors, REITs, hedge funds and REO-to-rental firms that provides the necessary tools for national firms to acquire individual properties in select markets nationwide.
Next up: A soon-to-launch national real estate platform that brings the cost-effectiveness, efficiency and control of their default technologies to private sellers, allowing them to select a local licensed agent while putting them in control of their real estate sales more than ever before.
Woodward Asset Capital, headquartered in Southfield, Michigan, was named a 2012 Top 50 technology provider by Mortgage Technology Magazine and has been identified by Inc. magazine as one of the fastest growing private companies in America. The firm provides customizable technology solutions to best manage real estate sales and prevent fraud in the real estate marketplace. Read company perspectives on the latest industry issues on the Woodward Asset Capital blog, http://www.woodwardassetcapital.com/blog/.