Banks may be seeing the light on short sales

By Brian Wargo (contact), In Business reporter

Fri, Oct 30, 2009 (3 a.m.)

Although some national analysts are forecasting more doom and gloom for home prices in Las Vegas because of foreclosures, a local analyst is skeptical of their dire predictions.

Larry Murphy, president of SalesTraq, which follows foreclosures, says he expects bank repossessions this year to be about 25,000 and match those in 2008. But Murphy says he thinks banks are starting to realize it makes better financial sense to allow owners to sell homes through short sales rather than repossess them.

Of the 35,742 closings through the first three quarters, 75 percent were foreclosures and only 10 percent were short sales, but Murphy says that percentage will pick up.

Murphy says 21,576 homes are on the Multiple Listing Service and 52 percent of those have a contingent sale in place. Of those 11,249, 71 percent are short sales, and 21 percent are bank-owned properties.

The reason for banks’ growing interest in going the short-sale route is the median price of a home sold through foreclosure is $116,900 and homes sold through short sales have a median price of $150,000, Murphy says.

None of that includes the lost mortgage revenue when banks go through the several months process of taking over a home, Murphy says. And then there is the damage sometimes caused to a home by the person foreclosed upon, he adds. All that points to banks wising up and allowing more short sales to go through, he says.

“I would like to send this to every bank,” Murphy says of information about short sales. “It says that when you foreclose on a property and throw the owner out, the house sits vacant and sometimes the owner trashes it on the way out, the lawn dies and the homeowners association fees don’t get paid.”

Banks geared up their departments to handle foreclosures and now will have to do the same for short sales, Murphy says.

“The solution may not be as easy as it appears for banks to quit foreclosing on properties and start doing more short sales,” Murphy says. “It is … whether banks finally get it. It represents an opportunity and why I am not going to predict the second tsunami of foreclosures that we have been talking about the past six months. It has not materialized yet in Las Vegas.

“And if it hasn’t materialized in the worst city in the nation in the worst county and worst state in the nation, then it may not happen throughout the rest of the country.”

Dennis Smith, Home Builders Research president, says the federal government has changed the rules for short sales that simplify and standardize them.

The bad news, he says, is that thousands of loss mitigators — bank employees who work out loan modifications — have to be trained to implement them and that will slow the process.

It is the loss mitigators who determine the price of the property. Smith says the results haven’t been encouraging so far, and the short sale process can take months to complete.

Murphy says more than 12,000 properties owned by banks aren’t on the Multiple Listing Service even though there are fewer than 2,000 that are listed. He dismisses any suggestions that banks are doing that to drive up prices.

“This is giving rise to conspiracy theories, but I don’t think banks are smart enough to come up with that,” Murphy jokes.

In other news:

• The Urban Land Institute will host its annual emerging trends in real estate seminar at 8 a.m. Nov. 18 at the Orleans. Rick Myers, Thomas and Mack Development Group president, will moderate a panel that includes Paul Berry, vice president of CityCenter; Tom Roberts, Station Casinos corporate vice president of development; Kev Zoryan, executive director of Morgan Stanley; Dan Van Epp, executive vice president of Newland Communities; Scott Wright, division president of Pulte Homes; Terri Sturm, Territory Inc. CEO; Kirk Boylston, regional director of EJM Development; and Rod Martin, vice president of Majestic Development. Advance registration is $30 to $50. For more information, call 798-5156.

• Realty One Group, a real estate brokerage with more than 2,500 employees headquartered in Las Vegas, has been recognized by Inc. magazine as the 192nd fastest growing company in the country. The firm says it came in second for overall gross revenue with sales of more than $1.1 billion in 2008.

• Randy Highland of McCarthy Building Cos. is president of Associated General Contractors of Las Vegas. He is the president of the Nevada/Utah division of the company.

Brian Wargo covers real estate and law for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at 259-4011 or at wargo@lasvegassun.com.