Fix It Until It's Broken!

When I read about the Mortgagee Letter that was taking away the possibility of Dual Agency in a Short Sale transaction, I immediately knew I had a blog topic.  Just a few short weeks ago I actually blogged about how the government finally did something right, that being short sales.  The HUD Pre-Foreclosure Sale program was written in stone long ago and sometimes that is a good thing.  From the beginning you know what they will accept.  It's terrific to submit an offer and know it will be approved. 

However, before the ink on that blog was dry, the government being the government, decided to mess with something that wasn't broken.  Are they just uncomfortable with the notion of a successful program? 

The NAR, thankfully, stepped in and convinced HUD to delay that condition, based on the fact that in some areas of the country, there is only one brokerage serving an area.  The very broad definition of banned dual agency included agents from the same firm.  HUDs reasoning it seems, if we can call it that, has to do with pocket listings.  A pocket listing is a home an agent doesn't advertise for sale on the MLS, and she can obtain a buyer before giving it exposure which might bring a higher price.

Now, the way I see it, this banning of pocket listings makes sense for bank-owned properties where they may be priced far below market value and can certainly bring higher than listing price.  However, on a HUD short sale, an FHA appraisal is performed prior to marketing.  They then issue a form to the seller which instructs the agent, not just at what price to list the property, but also at what net they will allow the sale to go forward.

If HUD is giving the agent a form ahead of time noting this is exactly the dollar amount we will take in the first 30 days, why is it now believed they can reasonably expect multiple offers, one higher than the next?   I, for one, do not see FHA appraisals coming in so far below the market value that those

properties are closing well above market prices.  Further, in a short sale, versus a bank-owned sale, the highest and best offer is submitted to the bank and considered on an individual basis.  In a HUD short sale we know going into it that offer will be accepted. 

In closing, the other difference between a short sale and a bank-owned property, comes in the intention to minimize the damage done to the homeowner's credit rating.   The longer the process takes, the more opportunity for  negative reporting to credit agencies.  If HUD agrees to a minimum acceptable number based on their own appraisal, why should they muddy up the waters by building in delays.  And as a REALTOR, I, for one, am getting sick of having the fickle finger of fate pointed at us as to blame for all the fraud that led to the current state of affairs.  I actually believe there is a case to be made for the fact that once REALTORS got out of the practice of preapproving buyers things went downhill.   But... that's another blog.