Deals made for homes are slow to close

The young couple put their four-bedroom house in Maple Valley on the market in mid-March. She had been laid off a few months earlier, and the payments — always burdensome — had become impossible.

Twelve days later they accepted an offer. At $259,000, it was a "short sale" — far less than the $363,000 they owed on two mortgages they took out when they bought the house in 2006.

The sale required the lenders' approval, since they wouldn't be getting all of their money back. One accepted pennies on the dollar and gave its OK last month. Jeremy Eide, one of the couple's agents, says he's still waiting to hear from the other.

If all goes well, he says, the sale will close next month — four months after the sellers accepted the offer.

May sales numbers released Thursday by the broker-owned Northwest Multiple Listing Service reflect the complex and notoriously slow nature of short sales, which real-estate agents say are occurring more frequently in the Seattle market.

Pending sales of King County single-family homes — offers that have been accepted by owners, but haven't yet closed — were up 27 percent from May 2008, eliciting cheers from brokers starved for good news.

Closings, in contrast, were down 14 percent. Real-estate professionals attributed the disparity to slow-closing short sales.

Historically, the number of closed sales in a month has been about 90 percent of the previous month's pending sales. May's closings in King County were only about 62 percent of April's pendings. In a note, the listing service said the gap "should begin to shorten as short sales close and the short-sale inventory shrinks."

But others question whether the turnaround suggested by the pending-sales statistics will happen. "Short sales don't close at the same rate as normal sales," says Tim Ellis, who edits the bearish Seattle Bubble real-estate blog. "I definitely expect the gap to shrink, but I don't know by how much."

The median price of a single-family house that sold in King County in May was $375,000, the listing service reported — down nearly 15 percent from May 2008, but less than 2 percent from the start of this year.

Median King County condo-sale prices were down 6 percent year over year. In Snohomish County, the median single-family home price, $310,000, was down 11 percent.

Quantifying short sales in the Seattle area is a difficult proposition; the listing service just started tracking them in April.

John L. Scott, one of the region's largest brokerages, estimates they now constitute 20 to 25 percent of its business. Bank of America, one of the country's largest home lenders, says its short-sale offers nationally doubled between 2007 and 2008, and have doubled again this year.

Eide, the Maple Valley couple's agent, is a short-sale specialist with Keller Williams Realty's Southeast Sound office in Renton. He says he's handled about 35 of them over the past two years.

The fastest took two months to close, the slowest five months. One Snohomish County broker says her office represents the buyer of a short sale that's been pending since October.

Why so long? Short sales must go through more hoops than other sales, Eide says. Mortgage lenders require considerable documentation of the seller's financial situation. They usually want an independent assessment of the property's current market value. If there's more than one lender, all must approve the deal.

Banks must weigh the proposed short sale against other alternatives, including foreclosure. Sometimes they make counteroffers.

Pushing a short sale through to closing requires constant bird-dogging by agents, Eide says: "The banks are backlogged. They've got so much on their plates."

His Maple Valley clients, who agreed to talk on condition their names not be published, moved out of the house when they put it on the market so it would show better. It's been unoccupied for nearly three months.

They say they stopped making house payments, which consumed 70 percent of their monthly net income, a month or two before that. They're anxious for the sale to close so they'll be free of any further responsibility.

"Buying this house was the worst financial decision in our young lives," they said in an e-mail.

Eide says the wait also has been stressful for the prospective buyers, who don't know when they should give notice at the apartment they rent.

He says his clients have offered Countrywide Financial, the lender who hasn't yet accepted the short sale, $221,000 on a $291,000 loan. He expects a response within a week.

Dave Sunlin, a senior vice president with Bank of America, which acquired Countrywide last year, told reporters last month that it typically takes 45 or 50 days to decide on a short sale. Complications can make the wait significantly longer, he added.

The bank is moving to streamline the process, Sunlin said.

A Bank of America representative said information is not available on what share of proposed short sales the lender approves.

But Sunlin told reporters more than 60 percent of the short sales the bank does OK, nationally, ultimately fall through, often because the buyers back out, buy another home or have trouble getting financing.

Eide says just four of his short sales haven't closed. "It comes down to having a complete package to submit to the lenders, knowing the different lenders and how they work, making new friends in the [lenders'] loss-mitigation departments and consistency," he said.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com