New Guidelines for Short Sale Approvals
Finally the long awaited government guidelines for short sale approvals and deeds in lieu of foreclosure have been released. The government is hoping that lenders will participate in the program to receive incentives for closing a short sale transaction. The program only applies to financial institutions that are federally regulated. The new government program is called The Home Affordable Foreclosure Alternatives Program.
Under the new program, mortgage servicers/lenders will receive a $1,000 payment and borrowers can receive a $1,500 payment for their relocation expenses. Mortgage servicers/lenders have 10 days to approve or disapprove a request for short sale. When the transaction closes, the lender must release the borrower’s debt to the lender in full. This prevents the lender from collecting a deficiency judgment against the borrower.
The new program protects brokerage commissions because lenders/loan servicers are prohibited from reducing brokerage commissions. Many Realtors will not show their clients short sales because they take too long and there is no guarantee that the lender will approve the short sale. These guidelines should benefit everyone.
More Short Sale Transactions
The outlook for 2010 is that the new program should shorten the short sale approval process making more short sales the choice of lenders and sellers in lieu of a formal foreclosure proceedings. Buyers will be more apt to make an offer on short sale properties now as well knowing that the waiting period will be quicker. The guidelines are not mandatory though, but it is hoped that lenders will take advantages of the financial incentives offered by the government to them if they complete a short sale transaction.
Why Short Sales Have Failed in the Past?
The main reason why so many short sales have failed in the past has been that the process takes too long. Varying anywhere from three months to a year. Buyers end up walking away from the deals and finding other properties that are not short sales. Sellers and their Realtors have to start all over with a new buyer. Although the process is generally quicker on a pre-approved short sale, the seller is still at risk of losing their home to foreclosure if the lender has already instituted foreclosure proceedings because the borrower is in default on their loan. The other reason is that many sellers or buyer/investors have tried to negotiate short sales themselves without hiring a real estate attorney and failed because of lack of experience with short sale negotiations.
Reasons Why Attorneys Have Better Success Rates Negotiating Short Sales
A real estate attorney is experienced in handling short sale negotiations and has established relationships with the loss mitigation departments of many lenders. Also, a real estate attorney will be able to help you stay in your home longer by negotiating with your lender to stop foreclosure procedures against you while your short sale negotiations are ongoing. It is a mistake for you or someone who does not have the experience to attempt to negotiate the short sale with your lender because you will end up wasting valuable time and could lose your home.
“The best way to protect yourself is to be educated on all of the possibilities. Make sure to keep an open line of communication with your lender on the subject. If you have hired an attorney to represent you against the bank, be sure to express your concerns about any future liability,” says, Joel Jacobi, Managing Attorney at American Residential Law Group.
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