The Dirt On New Short Sale Laws

The dirt on short sales

So the housing crash has left at least 11  million people in the unenviable position of owing more on their homes than they are worth. 

Although it seems grim, we are in a much better place than we were in the fall of 2008.  That was a scary time.

We’ve had a year and a half of first time homebuyer tax credits, some states are receiving aid to struggling homeowners, and now we have something new on the scene through the HAFA program that we hope will help too.

This federal foreclosure prevention program has been expanded to encourage delinquent homeowners to avoid foreclosure.  What it does is streamline the short sale process.

How does it work?

Apparently participating banks (I know Fannie Mae and Freddie Mac loans are not included) are going to be required to tell the sellers what the minimum amount is that they will accept for the short sale before the home is listed.

I’ m really curious to see how this plays out.  Currently we spend about 6 months worth of time waiting for that answer.  While it is unintelligible for me as to why the banks take their sweet time shuffling papers which can be faxed only (no email!) from department to department, I just can’t fathom how they are going to be able to take a 6 month process and turn it around.

Maybe this means that the bank will do all this in 6 months anyways, the difference will be that then you list your home and can open and close escrow in the customary amount of time.

To be honest, if that is the case, it will help the housing market.  Part of the problem right now is consumer education.  It is really difficult to understand how the short sales work until you’ve made offers on them and tried going through one.  On top of it, the general consumer see a home sitting on the market for 100+ days and doesn’t understand that the bank won’t negotiate once it establishes the price it has approved.

The short sales are a mess.

Some other points that apply to the new process is that once an offer is secured for the agreed on price, the bank must then approved the proposed sale within 10 days.

The property will have to be listed with a realtor from the community.  However, according to the California Association of Realtors, be aware that because short sales require the bank to accept an amount less than the amount due on the mortgage, banks may not approved a short sale even if the price is comparable to recent sales in the neighborhood.

What???

Stop and repeat.  So the bank can not approve a sale even if the price is fair market value? 

I really really hope that this new expansion on HAFA helps all of those out there struggling.  And I hope that these banks don’t have the option to just deny a sale on a whim.