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The Distressed Property Institute recently hosted a webinar with Mr. Bob Hora, Senior Vice President of Bank of America, to discuss recent updates to BofA’s short sale process.

Mr. Hora asserted that Bank of America is committed to doing short sales and rejected the myth that banks have incentive to foreclose, saying that the bank doesn’t want more repossessed property on their books. Some interesting figures: Bank of America closed 42,000 short sales in 2009, 90k in 2010, will close more than 100k in 2011, and they plan to do even more in 2012.

Short sales have a reputation for taking a long time and BofA’s goal is to shorten the process. They’ve been hiring more people and have gone from 200-250 short sale employees a couple years ago to now having 3,000 employees working just on short sales!

Bank of America is sending out targeted solicitations to homeowners who are at risk of foreclosure. This includes a transition guide that goes over options to avoid foreclosure, deed-in-lieu (DIL) of foreclosure, why you should consider a short sale, HAFA, avoiding scams, etc.

Mr. Hora went over some of the reasons that keep BofA short sales from closing, such as improper documentation, valuation issues, unallowable fees, etc. Also outlined were the specific procedures to escalate a problematic BofA short sale. It is Bank of America’s belief that a “trained agent…makes a big difference.”

He reiterated that agents should be expanding their short sale knowledge, should know their marketplace, and should set appropriate expectations with everyone involved. Short sales aren’t going away anytime soon and they’re usually a worthwhile alternative for homeowners facing foreclosure.

In Flagstaff, the number of short sales and foreclosures have been holding steady, but with improved processes and agent training on short sales, perhaps we’ll be able to put a dent in the number of foreclosures.

Some buyers in Flagstaff seem to be wary of making offers on short sales for a couple reasons in particular. They don’t know how long the process will take and whether the short sale or price will even be approved.

This is understandable considering that in a conventional short sale, the seller’s lender (who has to approve the short sale) isn’t involved much, if at all, until there is a contract to purchase the home. There are things a knowledgable real estate agent can do to shorten the time frame and increase the chances of success; however, in this situation there’s no way of knowing exactly if and when the short sale will be approved.

Herein lies the benefit of pre-approved short sales. In a pre-approved short sale, the seller’s lender approves the short sale upfront (before an offer is made). They determine a minimum price or net proceeds that they’ll accept and they usually have set time frames for responding to offers. As you can imagine, this makes the listing that much more appealing to buyers, who then have a better idea of their chance of successfully closing on that short sale in a reasonable amount of time. Another benefit is that there’s usually a specific amount of time that the foreclosure process is halted while the seller attempts to sell the home.

The two most common types of pre-approved short sales are HAFA and FHA. In these programs, the short sale is processed through your lender but the guidelines and qualifications are set by the government. Unfortunately, not every loan or borrower is a candidate for these programs and not every lender participates; however, it’s worth finding out. Many major lenders, such as Citibank, Wells Fargo, Chase, and BofA are also beginning to roll out their own “in-house” pre-approval programs. If you’re a homeowner considering a short sale, the first person to talk with is a real estate agent who is knowledgable about short sales and can walk you through some different options.