Ramon Garay lost his Santa Rosa condominium this winter in a short sale.
His wife died of cancer last summer, and he could no longer afford the home on West Steele Lane. After eight months of efforts, his real estate agent in early March sold the condo for $70,000, far less than the $260,000 he owed to his lender.
"I can't tell you how it feels," Garay said. "One moment you own your own home and then you lose it and end up sharing a room with another person."
There's no end in sight for short sales, those often long and difficult transactions where homes are sold for less than the amount owed on the mortgage.
Since 2008, nearly 2,500 Sonoma County single-family homes have been sold as short sales, according to CJ Holmes
Brokerage in Santa Rosa. That's more than one in every six sales.
It could take years before all the Sonoma County homeowners with negative equity in their homes can sell their properties without a short sale, according to local agents.
Mike Kelly, an agent with Keller Williams, said underwater owners represent the real "shadow inventory," a term associated with homes on track to be lost in foreclosure.
"The shadow inventory is people who want to sell but can't sell because they're frozen into the houses," Kelly said. The only way out may be a short sale.
About 31,000 county homeowners owed more than their homes were worth at the end of last year, according to CoreLogic of Santa Ana. That represents 29 percent of all county homeowners with mortgages.
Distressed properties make up about half of all single-family home sales in Sonoma County. Such sales tend to hold down nearby home values and constrict demand for new construction.
Last year, 27 percent of sales were bank-owned foreclosures and 20 percent were short sales, said Santa Rosa broker/owner C.J. Holmes.
In 2008, short sales made up 12 percent of the total, said Holmes, who tracks the sales using multiple-listing service data.
Plenty of agents have stories about the frustration of trying to complete these transactions. The average short sale, from listing to close of escrow, takes 172 days to complete, compared with 74 days for bank-owned foreclosures and 99 days for all sales, said Kelly.
"Short sales are not easy, and they're never guaranteed," said Belinda Andrews, a broker associate who specializes in such sales for Century 21 in Santa Rosa.
Andrews said it took three years and 10 contracts written with different buyers before a bank agreed to a short sale for a house on College Park Circle in Santa Rosa.
Her client, Consuela Zavala, had bought the house for $479,000 in 2006.
"We put it on the market because my husband lost a job," Zavala said. "We didn't have the money to pay for it anymore."
The bank turned down sale offers even when the home's value kept falling and after the couple had stopped paying the mortgage of $3,600 a month, Zavala said. Last fall the bank agreed to sell the house for $219,000.
Short-sale clients typically have stopped paying their mortgage even when they're still living in the homes.
"I hardly have anyone come to me who hasn't depleted their savings and run up their credit cards trying to save their homes," said Andrews, who also represented Garay in his short sale.
Short sales were virtually unheard of until home prices began their historic slide four years ago. The county's median sales price for single-family homes hit a record $619,000 in August 2005 before tumbling to $305,000 in February 2009. In March the median price was $315,000.
In the ensuing years, both bankers and real estate agents have become more experienced with what it takes to get investor permission to complete short sales. And investors are becoming "more comfortable with taking a loss, a big loss in some cases," said Dustin Hobbs, a spokesman for the California Mortgage Bankers Association.
Both state and federal laws have freed sellers from requirements to pay income tax on the thousands of dollars of debt forgiven in short sales. And a new state law in January protects such sellers from being pursued for further payments by the lender of the first deed of trust mortgage.
However, sellers still may be pursued for debt collection on a second mortgage. Agents said it is crucial in short sales to get lenders to agree to release the seller from further liability.
Despite some changes by banks, agents complain that it still can take months to get an answer from certain lenders. By then, prospective buyers often have given up and gone to look for other properties.
A short-sale application can exceed 100 pages, and "often you still feel like you thrown it into a big black hole," said Glen Hurley, manager of Platinum Realty in Santa Rosa. "It's just really, really frustrating if you're in any kind of a hurry at all."
Two Coldwell Banker agents, assistant manager Dan Stonum and broker associate Teri Shaughnessy, now run a service for agents in which they conduct the short-sale negotiations with the banks.
The sellers' agent lists the property, gets an accepted offer and then "they just hand the file over to us," said Shaughnessy.
Agents said distressed properties are affecting values of the county homes around them. Bank foreclosures, also known as "real estate owned" or REO, are often sold at discounts in order to move them quickly. And short-sale properties are often offered at below-market rates to attract buyers -- even though the bank later may demand a higher price.
"The short sales and the REOs together are really impacting the perception of value in the marketplace," said John Duran, president of the Santa Rosa chapter of the North Bay Association of Realtors.
Many underwater owners will do all they can to keep their homes, agents said. Some may believe that one day they will build back equity in the properties or they simply may feel obligated to pay their debts. But if home prices stay flat for years, agents said, more owners likely will consider short sales.
"I can see more and more people give up unless the economy booms," said Holmes. "You may not sell short this year, but if you ever want to move, you'll sell short."
Staff Writer Martin Espinoza contributed to this report. Staff Writer Robert Digitale blogs about local real estate at realestate.blogs.pressdemo- crat.com. He can be reached at 521-5285 or robert.digitale@
pressdemocrat.com
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