Kelly Ercanbrack

Branch manager

Coldwell Banker Residential NRT in Orem

The housing downturn has gripped Utah's economy for nearly two years. Across the nation and in Utah, there is still a tug of war between bullish and bearish forces. On the bullish side, falling prices, historic low mortgage rates and attractive state and federal grants have made homes far more affordable for the first-time homebuyer. But on the bearish side, rising unemployment and job security concerns have sidelined many people. Even those with secure jobs who want to buy can't always get loans on attractive terms because of more stringent lending standards today.

Even though the magnitude of the foreclosure problem in Utah isn't quite as severe as the hardest hit states like California, Nevada, Florida and Arizona, the supply of bank-owned homes is expected to grow over the next few months as banks and mortgage companies end moratoriums that delayed action against delinquent borrowers. Mounting job losses could cause Utah's foreclosure rate to break the last record set in 2002, potentially affecting 13,000 more homes in 2010, local economist Jim Wood predicts.

Kelly Ercanbrack, Coldwell Banker's branch manager in Orem, talks about the impact of foreclosures and short sales on the local housing market as well as his outlook on home prices and sales.

• Question: Is being a foreclosure or short sale expert a requirement for all real estate agents in light of the growing problem in Utah County? Why is Coldwell launching its so-called "Short Sales Trusted Adviser" training program nationwide including Utah? How would this program mitigate the problem?

Answer: Even though short sales and foreclosures in Utah aren't as dramatic as those in Las Vegas, Florida or California, they're still a segment of the market here and we want to make sure our agents are trained and have the expertise to take care of the buyer or seller involved in the short sale. A short sale is a transaction in which the seller's lender agrees to accept a payoff less than the balance due on the loan. The advantage of a short sale for the bank is that it can result in a smaller financial loss than foreclosing. For the homeowner, the advantage is avoiding foreclosure. Hopefully, the program will alleviate some of the homes that would have ended up in foreclosure because they get sold as a short sale instead.

On a national level, most banks are overwhelmed by the growing number of short sales. Our training program will not only cover the fundamentals of the short sale process, it will also provide a nine-page short sale package that contains all of the seller's information in one place so the bank can keep their records organized. For instance, our package will include information on the seller's financial situation, his income and tax returns, why the seller wants to go through a short sale, and who to contact. Hopefully, that will simplify the short sale process so the bank can expedite approval.

• To date, how many foreclosures and short sales make up total home sales in Utah County? When did foreclosures and short sale activity start to pick up?

Of 4,431 active listings of all residential types in Utah County, 875 of those are short sales and 60 are foreclosures as at the end of May, according to data from the Wasatch Front Regional Multiple Listing Service. That's nearly 20 percent of the active market in Utah County. Unfortunately, we don't have a way to compare those numbers with a year ago. That's because the MLS only started tracking short sales since September 2008 when more of those homes came on the market. Of the 1,011 home sales that occurred or are pending in Utah County, 208 of those are short sales and 41 are foreclosures as at the end of May. These started picking up in September 2007 as the number of buyers dropped and listing inventory started to accumulate when the subprime lending market collapsed.

• Are foreclosures and short sales igniting bidding wars on certain homes in Utah County? Have you seen multiple bids on certain homes in Utah County? If so, what type of homes and what price range?

Many of the foreclosed homes being placed on the market are very good buys so it's not uncommon to have multiple bids on those homes. We've been seeing more of those in the past two years, multiple bids in different price ranges. A lot of it is about price. It really depends on how well-priced the home is for the market. I was involved in a foreclosed home sale in Springville in January. The home, about 4,500 square feet, had a fair amount of work that needs to be done. It was appraised for $600,000, but the bank came in at $350,000. Within a few short days, there were 11 bids.

• Why are short sales so notoriously difficult and time-consuming?

They're complicated because the banks are so overwhelmed with so many of them nationwide and don't have enough personnel to process these cases. They're also dealing with markets more severely impacted than Utah's. When a seller in Utah elects to go through a short sale, their file gets placed along with others across the nation. And because the banks are dealing with such a high volume, that makes it more difficult to process the cases in a timely matter.

• But we've heard stories about buyers being frustrated and discouraged by the short sale process because they end up bidding more than what the property was listed for. Are many short sales listed on the Wasatch Front Regional MLS deliberately priced very low to elicit multiple bids?

The bank takes the bids that come in and run it through their process, and go back to the buyer with an amount the bank can accept. Some desperate sellers deliberately price the home much lower just to get the short sale process going, but that's a small portion of short sales. As a disclaimer, some agents are now stating in the MLS listing that short sale prices may be higher than as advertised. If the seller priced the home substantially less than what the bank would take, then the bank would counter back with a higher price.

When Coldwell puts a short sale on the market, we try to figure out what the bank will take and offer it at that price, because it doesn't make sense for an agent to offer the house at a price the bank won't accept. That leads to frustration on the buyers' part if the bank counters at a much higher number than the home is offered at.

• How would potential home buyers find out when short sales and foreclosures come on the market? There are numerous Web sites that provide listings of short sales and foreclosures for a fee. Are these Web site services reliable?

In Utah, when foreclosures and short sales come on market, the agent for the seller or bank will offer them across the Wasatch Front Regional Multiple Listing Service and buyers working with Realtors will be able to see when they're available. I've checked out one Web site service that my client paid for that offered to locate short sales and foreclosures in Utah. But when I cross checked the listings with the Wasatch Front MLS, the properties that were listed as foreclosures weren't currently on the market. The best thing to do is to get with a Realtor you trust to find out what short sales and foreclosures are available. There is a another site called Utahrealestate.com, where the public can access for free properties that are for sale. It's a sister site to the MLS, which is managed by a company that's owned by the Utah County, Salt Lake and Weber and North Davis Realtors Associations.

• What does the bank have to go through before they can approve a short sale?

The bank first checks out the seller's financial information, their income, past tax returns, why they want to do a short sale, and if the seller meets the bank's criteria, then the bank would hire an appraiser to look at the property to determine its market value. Then the bank implements a formula that determines what they can accept as the short sale price. Banks may not like holding onto many distressed properties on their books, but they don't want to give the property away either. Similarly, when a bank has a foreclosed home to dispose of, they'll hire an appraiser to determine the market value, and depending on how quickly the bank wants to sell it, that will determine how aggressively they'll price it. With short sales, the length of time it will take to get bank approval could be between 30 days to as long as six months or longer.

• What are you telling sellers of ordinary homes, many of which are languishing because they refuse to lower prices enough to compete with bank-owned homes and foreclosures?

With 20 percent of the market buying short sales, and about 4 percent buying foreclosed homes, that's a little under 25 percent of the market, and that has an impact. Homes priced over $350,000 are the hardest hit because there's a higher volume of homes in that price range and only 17 percent of active buyers in Utah County today are buying homes in that range. To get those buyers, sellers really have to make sure their homes are clean and in a better condition than ever before, and the properties don't have to be priced below market but it has to be priced competitively.

• What prompted you to become a Realtor?

I was in law enforcement before getting into real estate. I was deputy sheriff for the Utah County Sheriff's Office, and my wife was a school teacher, but she wanted to stay home to take care of our two kids. And I couldn't provide for my family on a deputy sheriff's income alone. So I started doing real estate full time for Coldwell Banker in 1996. I was appointed manager of the Orem office in 2002, managing 50 agents at the time, and now 70 agents.

• Why would someone want to join this profession now? Is it tough for them?

The Utah County Association of Realtors had 2,400 members about a year and a half ago, but that's dropped to 1,600 in early 2009 because of the difficulty in the real estate market. It's a great time to join the profession now because the market is starting to improve. If someone gets into real estate now, they'll learn to build their business in a market that's slower than previous years, which gives them time to get learn the fundamentals that help them to do a better job. That includes figuring out what's in the best interest of the clients, taking time to interview them, finding out what their needs are and providing them options.

• What is your outlook for home sales and home prices in 2009 and 2010 as rising unemployment in Utah, more stringent lending standards, along with high inventories of unsold homes and rising foreclosures continue to weigh on this sector?

There'll be a gradual slow improvement in home sales and prices this year, but it won't go back for a long time to the double digit increases in home prices and sales and equity appreciation that we saw in 2005 and 2006. That's the exception to the normal real estate market. 2005- 2006 weren't normal markets because we had people buying homes for the wrong reasons. They were looking at real estate like a stock, flipping to turn a profit. What's normal is single-digit or 1 to 3 percent appreciation in home prices each year.

• How effective have the Obama administration's policies been in helping the housing market recover?

It has brought a lot of optimism to people. People are asking how to take advantage of the $8,000 federal incentive and the state grant of $6,000. The stimulus package incentivizes first-time buyers to come into the market and buy their home and that in turn empowers the seller of that home to buy another home. More banks are working with homeowners to reduce their mortgage interest rates and create a payment that homeowners can afford to keep more people in their homes.

• While new home construction in Utah County showed a modest rebound in April, building permit activity is still dramatically off its peak in 2007, what other evidence is there that the two-year slide in housing may be bottoming in Utah County? When do you expect to see a real recovery in the local housing market?

Local economists are watching home sales in summer, which is the traditional home buying period, for signs of sustained recovery compared with the past year. But there are signs some improvement is already occurring. Home sales picked up in September, October and December 2008, and in March, compared with a year ago, even though they are still off their peak from 2007. There's also more interest for luxury homes now. For the first quarter of 2009, eight homes in Utah County sold for more than $1 million, compared with 15 homes that sold for more than a $1 million for all of 2008.