Short Sales – Not a Short Process, But Better
Posted on July 6th, 2011
Short sales are in general no longer the excruciatingly long and uncertain process they were in the near past. Efforts by lenders and the federal government have been shortening and simplifying the process, mainly because they recognize that it’s less expensive and a better approach for homeowners and lenders.
The federal HAFA, Home Affordable Foreclosure Alternatives, program provides incentives, including $3000 in relocation assistance for homeowners who complete a short sale. Some lenders are also providing incentives. Instead of the old “react to the offer” approach, lenders have created short sale programs to help homeowners who can no longer afford their payments or remain in their homes. So, what should buyers look out for or be aware of in the short sale process?
- Who owns the lien, and are there subordinate liens on the property, such as second or even third mortgage holders.
- Can all of the parties involved come to an agreement on the true market value of the property? If a real estate agent is involved, they may have given the owner a value, then there’s the investor buyer who comes in with their own valuation. Finally, the lender must agree, or there’s no deal. Sometimes either an agent or the investor can work with conflicting value estimates by adjustments or just better selection of comparable properties.
- There is a lot of documentation and paperwork involved:
>Letter of Authorization authorizing the agent or buyer to speak for the homeowner. >If listed, a copy of the listing agreement. >Purchase contract. >Estimated/Final HUD-1 Settlement Statement. >2nd lien approval letter, letters for all subordinate liens. >Hardship documentation. >Owner financial information, assets, liabilities, bank accounts, etc.
- If it’s a HAFA short sale, the borrower must have been qualified for participation. Once that happens, the lender will be proactive in the process. Once an offer has been accepted, there can generally be a closing within 45 days or sooner.
“Short sale” is no longer a process lenders want to avoid. It is helping to reduce foreclosure inventories, and lenders are becoming much more amenable to the offer and process.
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- New Short Sale Law is a Game Changer
- Short Sales vs Foreclosures for Distressed Homeowners
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- HomePath 3.5% Closing Cost Assistance
Tags: Process, Short Sales
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