Short Sale Industry Update

Posted on 22. Dec, 2010 by ctlms in Foreclosures, My Blog, News, Real Estate, Short Sale

So what's happening in the short sale world these days?

So being the end of the year I figured it is a good time to discuss in general what we are seeing in the industry as far as trends and timelines.

This year has seen a lot of changes mostly from Gov't intervention.  The largest of which was the HAMP program and then the addition of the HAFA program to it.

The HAFA program covers a huge majority of non-FHA or VA loans.  This means that if your seller doesn't have a FHA or VA loan it is very possible that they may be eligible for HAFA.

The biggest reason for a seller to want a HAFA short sale over a traditional short sale is the guarantee of a full release from the deficiency balance.  In a traditional short sale there is no guarantee of that and it is something we must vigorously negotiate for.

This program has great benefits for the homeowner but adds a lot of time to the process and has many pitfalls that we must avoid whenever possible.  So even though the intent was to streamline the short sale process, it is by no means an easy thing to work with.  That is of course unless you don't care about commission cuts, and required mortgage payments and deed-in-lieu requirements, etc.  But that is another discussion.

Now that this program is several months old we can look back and evaluate it and the general short sale process as a whole.

For the most part HAFA has added some extra time to the short sale process, even for loans that are not HAFA.

90 Days is about average for a traditional short sale but with some lenders 60 days is more common.  HAFA adds at least 30 days to that process and with some lenders as much as 60 days.  So much for streamline.

So on average we are looking at 60-90 days for non-HAFA and 90-120 days for HAFA.  Still no "short" process.  But we are seeing a good retention rate for buyers that have this fully disclosed to them at the beginning.

When the buyer knows up front that it will be 90 days before their offer is approved or denied, and they receive at a minimum a weekly update throughout that process, they are hanging in there.

This year we have had a better than 90 percent close percentage on our short sale files that have received offers.  Some of them may not have closed with the 1st buyer, but they closed.

Now those that never received offers.. there's not much we can do for those other than see if the seller qualifies for a Deed-In-Lieu of Foreclosure.  This is worse for the seller's credit, but not as bad as a foreclosure.  And of course we and you, the real estate agent, get the short end of the stick as we do not get paid.  But we did our best for the client.

Overall the short sale world has changed a bit this year but really just in the minutia of the process.  In the end it is still the same thing.  The seller needs a hardship and the bank needs to believe they are getting the best offer they could get for the property.  The rest is just paperwork, faxes and phone calls.. A lot of them.

My biggest take away from the past year is a suggestion that I have always made.  Get started as soon as possible.  Some of these available short sale programs allow us to start before there is an offer, saving time for the buyer.  Although that is not always advisable due to certain negatives.  But when we are fully prepared to submit a short sale package to the lender, before an offer comes in, we are all at a huge advantage.

Don't forget, even before you list a property that we are available to answer your questions and your seller's questions.  We want to be involved from the very beginning so we can help you to set the proper expectations with all parties involved and avoid any potential pitfalls that may be on the road ahead.

On a personal note I want to thank all of you who have used our service this year.  We have been able to help dozens of homeowners avoid foreclosure together over the last 12 months.

Here's to the new year and have a Happy Holidays from us here at Loss Mit Services.

Sean Wilder

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