Short sales, despite the name, have always taken a long time to process. That’s because the short in short sale refers to a shortage of money and not time. Buying a house via short sale allows a homeowner to sell their property for less than what’s owed on the mortgage, with the lender’s approval.
When short sales hit the scene some 10 years ago, they had been around for much longer than that. At the time it was a little known process that often investors only ventured to tackle. They knew if they could get the bank to agree to a low price and dump the home they could get a great deal.
Then the crash came and brought with it a need for more people to know about this method of avoiding foreclosure. Short Sales from the time the first bank accepted one til now in 2018 have always been a long arduous process. The length of the process is mostly due to competing goals from servicer to bank and insurer.
Recently, U.S. Treasury Department set new rules to yet again, streamline the short sale process. However, most of the short sale specialists that we talked to weren’t impressed with the changes.
“If the changes have any effect at all, it’ll be a first for the short sale history books,” said Brayson Verzella, a Realtor who runs Team Infinity in San Antonio, TX. Brayson explains that rules can sometimes help get short sales done because you can call out banks, but without a way to hold anyone accountable and without help from more workforce, nothing is likely to change.
The new rule only applies to banks that owe the federal government TARP (Troubled Asset Relief Funds) bailout funds. Only these banks have to participate in this program. There are some incentives designed for all banks to join in, like offering $1,000 to lenders for administrative costs. One thing is clear from short sales that if the bank can mitigate a loss and cover their cost they will do so. However, time will tell if it changes anything.
Here’s the new changes that might be worth noting. Again, who knows how close banks will adhere to these.
- Buyer’s need a pre-approval letter within 3 days. This is nothing knew and it’s of course intimating that you need to get an offer prior to submitting request for a short sale. A process banks claim is the opposite of how it works.
- Lenders have to approve or deny the offer within 10 business days.
- Lenders can’t schedule the closing for less than 45 days. A tactic many short sale lenders were notorious for – that is offering short sale approval with ridiculous time frames.
- If you’re buying a house through a short sale, you can’t sell it for another 90 days. This rule is similar to many FHA short sale rules.
- As usual, Short sales through HAFA (Home Affordable Foreclosure Alternatives program) aren’t allowed to involve selling the property to a friend, family member or anyone with whom you have a close personal or business relationship.
- Similarly, Up to $3,000 will go toward paying the junior lien holders to release their lien.
- Assuming you can verify that the lender is playing by the rules, there is one nice statement that prevents the lender from foreclosing during the short sale process.
- Mortgage Servicers can’t charge their own set of fees or try to tamper with the real estate agent commissions. This again would be a welcome change.
- Every Seller will get up to $1,500 for a successful short sale.
At face value these rules seem like a welcome change. However, these rules aren’t anything new, a review of the HAFA Program will show many of these same rules. However, in general it’s a good step forward.
Keep in mind that in order to qualify for a short sale, you still need to own a home that is worth less than the current value. We get a lot of e-mails asking about how to short sale and unfortunately the answers aren’t good. Just because you can’t afford your home doesn’t mean you can short sale. However, the better news is that sometimes you can just sell outright. You can do this even if you are behind and often you’ll get more than $1,500 depending on your equity position.
A short sale can be a lifesaver compared to having your house foreclosed on you. Not that it’s a much better situation — you still end up losing your house with only $1,500 to show for it — but at least you can leave with on your own terms. Yes your credit score will get hit, it won’t be utterly destroys as is the case with a foreclosure.
“In many cases, a home owner can stay in their home for a few months, not make any payments and potentially get a small amount to move. This is much better than receiving eviction notices and fearing a sheriff will kick in a door.” Pam Ahern, from Intown Atlanta Area Homes, said, “when a home owner hears how it works, they are so relieved…. even if it’s an uphill battle and might not work. It’s better to take action then to let the bank have control.”
In either case, (foreclosure or short sale) you will not be evicted in the state of Georgia. Ownership changes hands but you won’t be evicted until an official eviction process is undertaking.
If you find yourself unable to keep up with your mortgage payments, follow the slightly modified by us advice of the U.S. Department of Housing and Urban Development (HUD):
- Don’t ignore the problem
- Don’t ignore the MAIL!!! This is a huge one. If you get a letter from an attorney that says, “on [this] tuesday of [this] month…” then you need to get help ASAP.
- Study the foreclosure laws and timeframes in your state
- Contact a HUD-approved housing counselor by calling (800) 569-4287
- Once you have a plan, then contact your lender.