"But isn't this a buyer's market?" I hear this question at least once a week. It's the expression of both confusion and frustration that has taken ahold of most of the buyers presently looking for a home or an investment in our very challenging real estate market. You would think the answer would be as easy as a "yes" or "no", but the reality is more of a very muddled "sort of."

In years past, we could chart whether we were experiencing a buyer's market or a seller's market based on a few factors. If there was an excessive amount of inventory and sellers had to be willing to negotiate to get their homes sold. Then clearly this was a buyer's market as the buyer's had the "pick of the litter" and for the most part could dictate the terms of the sale.  This environment allows buyers to pay lower prices for more desireable homes. If there was low inventory, which prompted bidding wars on mediocre listings, it was clearly a seller's market. The seller would take their time to pick the absolute highest and most desireable offer and they would dictate the terms of the sale to the buyer.

Today is a weird mix of the two which is leaving all parties very frustrated.  Sellers are highly motivated to sell their homes before they lose more value or lose their home to foreclosure, so they're ready to give the control to the buyers to get the deal done, which would indicate a buyer's market. On the flipside, there's actually very few quality listings that the buyers want to purchase, which creates bidding wars, and push buyers to spend more than they expected in a declining real estate market. This mimics more of a seller's market.  So how do we have both a buyer's market and a seller's market simultaneously? Well, you add to the mix that the majority of the properties on the market are either bank owned or short sales, and you now have a completely different dynamic. The banks are really not motivated to sell, at least not in the way that a traditional seller is motivated in a buyer's market. Banks want their price and terms, and they are willing to push back and wait for their terms to be met. The banks also dictate how quickly the buyer performs, what escrow and title companies are used (don't get fooled by the rhetoric that buyer's get to choose- they do have the right but the banks then require the buyer to pay for those services otherwise covered by the seller), and levy fees to the buyer for any delays or changes to the escrow. All of these requirements for the buyer to meet, yet the bank gets to take as long as they want without penalty to make their decisions at every step. Sounds like a seller's market, right?

So, where does that leave us today? Homes are priced radically lower than they have been in years and the interest rates are amazingly low right now. These conditions make it a great time to be a buyer in the market. I wouldn't hesitate to buy a new home or investment now because there are great deals out there, so it is a market that will benefit buyers in the long run.  Does that make this a buyer's market by definition? Well....I'd probably classify this as a bank's market.

It's a common misconception that a short sale should be a quick process, but the "short" in short sale has absolutely nothing to do with the length of time to close an escrow. In reality, a short sale is probably the longest escrow you will ever experience in your real estate lifetime.  The government has attempted to put numerous policies in place to regulate the bank's processing procedures and require shorter turn-around times, but none of these rules have had a real effect on the time it takes to process your request.

Unlike a "traditional" sale, banks make the rules and take their own sweet time to get around to reviewing the file. I have closed escrows on short sales within 30 days of presenting the initial offer to the bank, and others have tested everyone's resolve and dragged the escrow process out 5 months from the offer date. And as all parties bite their nails and wait to see if the sale actually goes through, the bank's are continuing to layoff more and more staff members, causing an even bigger backload in their processing system. I do have sympathy for the short sale negotiators who are carrying upwards of 14k, yes thousand! files on their desk to sort through. No wonder we're all standing around waiting.

So what can we do as sellers, Realtors and buyers involved in a short sale transaction?  The most obvious, be patient. As a homeowner attempting to sell your home as a short sale, get all of the necessary paperwork your Realtor requests together as soon as possible. A clean and complete file will help expedite the process with your lender. As a buyer, clearly communicate your timeline to your agent upfront. If you have to be moved into a new home in a certain school district in time to register your child for school in the Fall, choosing a short sale home may not be the wisest decision to ensure your successful placement in the district. And finally, research who the lienholder(s) are on the property prior to submission of your offer. I have found that smaller banks like PNC and Aurora take the longest to get around to even reviewing the file let alone ordering the Broker Price Opinion whereas Chase seems to be very responsive and timely. Bank of America is a hit or miss depending on the time of day you call or the agent you're assigned to.  If there is only 1 lienholder, or if the 1st and 2nd are with the same lienholder, your negotiation process will be a little bit faster. If you have multiple lienholders, be prepared for a very, very, very long wait.

Short sales unfortuntely are going to be a part of our real estate system for many years to come so arm yourself with ample patience when you come to the negotiating table on a short sale purchase.

I have noticed an increase of questions each week from clients and friends asking me whether loan modifications actually work or not and how to get one accomplished.  Although the White House has been pushing for banks to modify struggling homeowners' loans so they can stay in their homes, and have created multiple programs to facilitate the modifications, you need to know upfront that it is a low percent of applicants who get their loan successfully modified. If you are considering whether to try a loan modification or to simply short-sell your home, you should attempt the loan modification first. Your efforts to modify your loan will show your sincerity to the bank if you do not get an approval for a modification and then request a short sale. Banks are not motivated to approve a loan modification for a homeowner that is attempting to sell their home in a short sale, so start with the modification first.

If you are struggling to make your mortgage payments each month, you need to analyze what has changed in your life since you originally signed to pay the loan. Your lienholder will require you to document the change in a hardship letter, so it's the first place to start your discussion. In most cases you can find the lender's loss mitigation requirements and how to meet the parameters to modify your loan on their website. Typically, they are looking for a major event in your life such as loss of job for extended period of time, significant illness or death in the family of primary wage-earner.  Simply feeling the financial crunch that all Americans are feeling isn't enough in most cases for a loan modification.

Do some research on the various government programs so you know your options with the bank. A great place to start is the Making Home Affordable website: www.makinghomeaffordable.gov where you'll see almost everything the banks can and cannot do for your particular case.  Remember, "can" doesn't usually translate into "will" do for you. Some options are refinancing to a lower rate, increasing the length of your loan term from 30 to 40 years, or banks can eliminate some of your principal (which is not done very often at all).

I highly recommend seeking the counsel of a qualified housing counseling agency. You can find a local agency at www.hud.gov and they just received another $10m in counseling grants to continue their efforts to help Americans stay in their homes. They will guide you through the process as much as possible for a minimal fee or for free.  Stay away from the advertised loan modification companies that guarantee to keep you in your home for a fee. You can find more about these scam companies at www.preventloanscams.org .

Once you've identified that you meet the basic qualifications for the bank either via their website or in conjunction with the MHA programs and your HUD counselor, then it's time to contact your lender and start the process. Don't forget to take a deep breath before you make the phone call or hit "submit" on the online form. This is not an easy nor short process and it will test your resolve more than once. What appears to be a straight-forward process is long, drawn-out, and nerve-wracking. In order to prove you're really enduring a hardship with your current payment you will typically need to be 3 months late on your mortgage payment (don't skip a payment until you verify it's required with your bank). This will trigger the bank's foreclosure process and you will get daily collection phone calls, threatening letters and notices of foreclosure auction proceedings.

Lastly, develop a back-up plan in case the modification is denied. Will you be able to rally the money together to stay in the home or is losing the house your only option? Consider if a short sale is an option for you to save some of your credit rating and meet with a local Realtor to determine your home's market value in today's market. Make sure you choose a Realtor who is extremely familiar with the short sale process, can walk you through the steps, and can act quickly to stall foreclosure auctions if necessary.