Short sales are house sales in which the creditor takes less than what is owed to the mortgage. A dealer initiates a brief sale when his house is worth significantly less than the mortgage and he can’t keep up with the mortgage obligations. A creditor isn’t required to take a brief sale; it may choose to foreclose rather than
Sellers: Work with Your Lender
A 2008″Washington Post” article looking at short sales in northern Virginia reported that just one in 20 short sales offers there actually resulted in a sale. The reason? The lender review process. Each creditor has its own review process and time line, which range from weeks to months. Because lenders don’t need to encourage borrowers to default on loans just because their houses are”under water” (the home is worth significantly less than the loan), they create borrowers establish they can’t continue to make payments. This is referred to as the hardship review. Likewise, the creditor wants to verify the house is indeed under water and that the selling cost is as close to market value as possible. This entails the lender’s review of a comparative market analysis (CMA) or evaluation. If the sellers have not worked with the creditor before they record their land, the hardship and CMA testimonials happen in tandem with all the lender’s review of the purchaser’s offer. In the best of worlds, the reviews are finished in 45 days. In the worst, the creditor never responds and the seller wakes up into some foreclosure one morning a few weeks or months later. The Homes Affordable Foreclosure Alternatives program (HAFA), begun in the spring of 2010, offers incentives to lenders and borrowers alike to streamline the brief sale process. It requires lenders to provide vendors with its sale provisions and review CMAs and hardship applications up front. Lenders in the application agree to operate within standard real estate transaction time frames and deadlines throughout the sales process. If you are a seller, speak to your lender before you list your house. Ask if your lender participates in HAFA, and it will be a voluntary program. If not, request a CMA and hardship review. Ask about time frames for offer reply and give your lender with whatever it asks for in its own review.
Buyers: Patience is the Key
1 consequence of long delays in brief sales is that each and every time a prospective buyer walks away from a bargain, the cost is very likely to return. Short sales are generally advertised as such in multiple listing services. If you are a buyer, know up front that the trade-off for a possibly excellent price on a brief sale is a lengthy wait in the contract review process. If you are in a hurry to close, stay away from short sales. But if you’ve found your dream house and it is a brief sale, hunker down. It may take months to close, but if you’re not in a hurry, you won’t have missed anything.
Agents: Educate Your Clients
As the broker of a short-sale buyer or seller, the most important move you can make is to highlight how long the process may take. Don’t gloss over the frustrations likely to arise after days and weeks of no response from the lending company. Instead, prepare your customers for struggle when learning everything you can about the lender’s process and its history in local short sales. Instead of customers who walk out of a deal possibly blaming you, you’ll have customers recommending you to others as a short-sale specialist.