Why do only 35% of short sales close?

Question

CNBC just came out with an article today stating that foreclosures are on the rise and that this is just the beginning.  Please inform all of the realtors that you are working about this new information.

It stated within the article that only 35% of short sales that go into contract close.  Why is that?  I'd like your feedback on this low ratio?

Here are some the things I came up with in why that closing number is so low?
1. Bank of America has a horrible system.
2. HAFA is going to create havoc on the short sale markets
3. Any government policy with regards to loan modifications has been a mess and totally ineffective.
4. Realtors are handling the short sales the wrong way.
5. Attorneys are handling the short sale negotations the wrong way.

Bottom line if the government pushed back on the banks to expedite the short sale approval process with without the HAFA restrictions and as long as the banks are being reasonable with the short sale discounts we would be able to correct this market imbalance a lot more efficiently.  This is just my two cents.

David H.

Hazel L · Answer

Great discussion here, I'd like to add more specifics to the list:

1. Agent doesn't qualify the buyer well
2. Homeowner lacks education about how to pick/find an experienced negotiator and never asks how many short sales the agent has closed
3. Agent posing as "short sale expert" with no actual experience/short sale negotiating skills
4. Buyer's agents don't qualify a short sale listing agent, buyers not educated/informed about short sale process-->Buyer gets impatient and walks

Nick Reuter · Answer

My impression is most short sales don't close for the same reasons James said. Laziness, apathy, half-heartedness. There are plenty of professional short sale negotiators who have closing rates twice that average that do it faster and at a lower price.

Short sales aren't easy, so anyone looking for the easy road who doesn't want to put in the effort should go to a different niche.

James Ward · Answer

Reasons Short Sales do not close:
1) Incompetence
2) Impatient Parties
3) Ignorance

I could go on and on, but I guess you get the picture.

Boris Psakhis · Answer

I been going after short sales and here is what I am seeing on the ground.

1.  End buyer walks.  Most people (if they are smart) put 4-5 houses or more under contract for a short sale hoping to buy 1. 
2.  Realtor / Processor incompetence.  They don't  know how to start / move the process along.
3.  Fraud.  Some of short sale offers are fraud where home owners are trying to buy a house through a 3rd party.

Can you please post a  link to the article so I can read it

Mike C · Answer

To start, I would bet the closing rate isn't even that high. As others have said, this list could go on and on. The problem with short sales is if anyone in the chain is incompetent, the whole process grinds to a halt. There is the rub. There almost always is whether it be the end buyer, the realtor or the bank processor or some combination of them all. To me the biggest reason is the buyer loses interest in the amount of time the process is going to take and they are not properly prepared for this by whoever is representing them (see my sentence above). Many agents have very little understanding of what is going on. The bank negotiator has 150 other files on their desk and inevitably sets aside the ones with problems or with people who donâ€™t have any idea what they are doing. 
                    Nick is 100% on the money. SSs are living, breathing beasts that each take on a life of their own. There is a lot to understand and not that many people do. Even most bank employees know very little about what is happening outside their tiny box and again, they donâ€™t really care to learn the rest even though it would make their job much easier. Then even if you do understand them, you have to walk many people through it who really have no idea what is going on (and probably donâ€™t care). Then even if you do everything right, they still may not close due to a multitude of other reasons we havenâ€™t even mentioned yet. And not it has been months and now the seller moves on. And on and on.
                    
                    If you understand how they work, they are not really that bad. But make no mistake, it is a lot of work getting to that point and most people realize there are easier ways to make money when they realize how much they need to really understand to navigate their way through with a minimum of fuss. The guidelines are pretty inflexible and different for every investor. The ones that have the most flexibility (the ones the bank actually own and keep on their books) are by far the smallest part of the total market. 
                    
          We haven't even mentioned how many borrowers are in denial and sabotage themselves thinking a miracle will save them. We could write for days on this topic. Just my opinion as I am not a big fan of SS. Your mileage will vary.  
                    
                    Good investing all
                    
                    Mike C

Ted Akers · Answer

David, good post.  James, that is a fairly clear picture.  The realtors mindset is often "what price will the bank give me", whereas the negotiators mindset is how do I justify and negotiate my best possible scenario.  Just my $.02, but realtor negotiated short sales have a lower chance of making it to the closing table due to lack of negotiation.

Account Closed · Answer

Here you go.

http://www.cnbc.com/id/36195838

Please don't forget to vote up my posts. :)

Vincent Martinez · Answer

I'll agree on the agent incompetence. Some agents don't fully inform their buying clients of how long the entire shortsale process can actually take. There's a big difference between shortsales listed on the MLS that are still "subject to the lender's approval" and those that are approved. The ones that are approved will close much more quickly.

Why do only 35% of short sales close?

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