The question I get every day "How long will it take to have my short sale approved?" Here is current information to help answer that question. As noted in Distress Property Institute's Blog, how are the banks doing with regards to approving the short sales and their timelines....

Prime:
1. GMAC - 6 months
2. Citigroup's servicing arm CitiMortgage - about 7.5 months
3. Wells Fargo - roughly 8 months
(Countrywide - now owned by Bank of America - had the slowest short sale timeline at an average of more than 13 months)

Subprime:
1. Wells Fargo - more than 15 months
2. HomEq Servicing - 16 months
3. Morgan Stanley's servicing arm Saxon Mortgage Services - at a little more than 17 months
(Equicredit and Ocwen came in last with an average of more than 29 months on their short sale timeline)

Option-ARM:
1. JPMorgan Chase's EMC Mortgage - just over 8 months
2. Aurora Loan Services - 10 months
3. GMAC - just more than 10 months
(Again, Countrywide brought up the rear with a short sale timeline at almost 14 months)

Alt-A:
1. First Horizon - just over 9 months
2. Both Wells Fargo and Aurora - roughly 11 months
(Here's Countrywide again at the bottom at more than 13 months for their short sale timeline

Let's hope that the new HAFA programs will help speed up the process.

 

WASHINGTON - July 13, 2010 - It's a common Realtor complaint: A property going to contract appraises for less than expected. The buyer cannot put more down; the seller will not lower the price; the sale falls apart.

In some cases, however, the appraiser is not the cause. Banks - fearful of Fannie Mae and Freddie Mac policies that mete out punishment if a house is over-valued - err on the side of caution by shaving value off the appraisal. If guilty of price inflation, they could be forced by Fannie Mae to buy back the mortgage at a substantial cost. By dropping the appraisal value, they hope to avoid any suggestion that they inflated the numbers.

Frank K. Gregoire of St. Petersburg, vice chairman of the National Association of Realtors' Appraisal Committee, calls the problem widespread. Many sales are "sabotaged by lenders and underwriters arbitrarily reducing the (appraiser's) value estimate."

According to Gregoire, many lenders try to double-check an appraiser's work by ordering a low-cost electronic valuation. The electronic version uses only readily available public records and no on-site inspection, making it less reliable than a true appraisal. However, banks many times get scared if the electronic version is lower than the physical version, and they downgrade the true appraisal value to protect themselves. At other times, they ask the appraiser to explain the price difference, which can also delay closing.

The rules are about to change

Recognizing a problem, Fannie Mae instituted a new rule that becomes effective on Sept. 1. After that date, banks selling their loans to Fannie Mae can no longer simply drop the appraisal value. In guidance issued June 30, Fannie Mae told its participating lenders that they must contact the appraiser to "resolve" disagreements. If that fails, banks must order a second appraisal. In either case, lenders cannot simply drop the original value that supports a sales contract.

A number of appraisers hailed the change as great news.

Pat Turner, an appraiser in Richmond, Va., said that electronic appraisals don't consider property condition and "are often inaccurate." According to Turner, he once did a physical appraisal of a property that a California-based firm also did electronically. Afterward, the lender's review company asked Turner why he did not use one of the comps the electronic firm used. Turner investigated and said he found out that one "comp" was actually a vacant lot, and worth far less than the property being sold.

Fannie Mae's rule change also attempts to deal with other appraiser complaints, such as the use of inexperienced appraisers who travel to unfamiliar territory by clarifying "appraiser selection" standards.

Fannie Mae and Freddie Mac back about half of all U.S. mortgages, and Freddie Mac officials, when asked about Fannie Mae's announced rules, said they're "looking at it."

Source: Kenneth R. Harney

© 2010 Florida Realtors®

Article courtsey of Condo Vultuers Sunday, 11 July 2010 19:52 http://www.condovultures.com/home/6335-banks-repossess-4000-south-florida-properties-per-month-in-2010.html

Banks repossessed an average of 4,000 South Florida properties per month in the first half of 2010, representing an 83 percent year-over-year increase for the tricounty region of Miami-Dade, Broward, and Palm Beach, according to a new report from CondoVultures.com. Miami-Dade led the surge, experiencing a 125 percent spike in repossessions - also known as Real Estate Owned by banks (REO) - on a year-over-year basis. Palm Beach experienced a 112 percent jump while Broward's repossessions increased 42 percent, according to the report based on Circuit Court records from Miami-Dade, Broward, and Palm Beach. At the current pace, nearly 50,000 properties would be repossessed in South Florida in 2010, which would significantly outpace the modern day high of 30,400 repossessions that lenders took control of in 2009. Lenders repossessed nearly 26,250 properties in 2008 after taking title to 10,100 properties in 2007, according to the report.  "South Florida's real estate market is at a crossroads," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures® LLC. "The number of bank repossessions in 2010 is higher than at any time in at least two decades. This additional bank-owned inventory will undoubtedly be coming onto the resale market in the near future as discounted REO product. "The flip side is, the number of new foreclosure filings in South Florida is down 34 percent in the first half of the year, putting the region on pace for less than 70,000 actions in 2010 compared to 97,000 in 2009."  Despite the spike in repossessions, bank-owned properties still represent only about six percent of the 67,000 residences on the resale market in the tricounty South Florida region as of July 12, according to a new CondoVultures.com report. South Florida's residential inventory has increased on a weekly basis for five of the last six weeks, representing a 2.7 percent jump in available product since May 31. Still, the overall resale inventory is down more than 37 percent from November 2008 when there were nearly 108,000 residences available in South Florida, according to licensed Florida brokerage Condo Vultures® Realty LLC.  Market conditions aside, another key reason the number of bank repossessions has increased this year is the implementation of a new online auction technology being used by the South Florida circuit courts to clear the backlog. The online auction technology now allows hundreds of properties to be auctioned off more efficiently, industry watchers said. Before the online auction software was adopted independently in the first quarter of this year, each of three South Florida counties fulfilled the last step in the foreclosure process by holding courthouse auctions as many as five days a week in attempt to clear the backlog of properties. The problem was, only so many auctions could be held each day despite the best efforts by the court officials.  With the new improved online auction process, lenders are taking title to properties from defaulted borrowers at a much quicker pace but still not as fast as before the South Florida real estate crash, industry watchers said.  At the start of the housing crash in 2007, lenders estimated the typical foreclosure would take about six months to repossess a property at a cost of about $40,000 in the loss of debt service, damage, court courts, and attorneys fees. By 2009 as the foreclosure filings were spiking, the process extended out to an average of 18 months with an estimated cost of at least $100,000 per repossession, according to a recent CondoVultures.com report. Lenders repossessed 15,100 properties between April and June 2010, representing a 152 percent increase compared to the 6,000 properties repossessed during the same three month period in 2009, according to the report. In the first quarter of 2010, lender repossessed nearly 9,200 properties, representing a 25 percent increase over the 7,300 properties taken back between January and March 2009, according to the report. Miami-Dade, where Aventura, Coral Gables, and Miami Beach are located, has experienced more than 11,000 bank repossessions this year. After experiencing only 700 and 750 repossessions respectively in the first two months of 2010, the repossessions spiked to 1,300 in March, 1,700 in April, and 2,500 in May. In the month of June, Miami-Dade's repossessions eclipsed 4,000 in 30 days, according to the report. Broward, where Fort Lauderdale, Hollywood, and Pompano Beach are located, has experienced a more consistent number of bank repossessions in the first half of the year. Broward's monthly repossessions have consistently ranged from 1,200 to 1,900 in 2010, according to the report. Palm Beach, where Boca Raton, Delray Beach, and West Palm Beach are located, has experienced between 350 and 950 bank repossessions per month in the first half of 2010, according to the report.   Since the housing market crashed in 2007, there have more 91,000 repossessions in South Florida with Miami-Dade accounting for 43 percent, Broward an additional 42 percent, and Palm Beach the remaining 15 percent, according to CondoVultures.com. "The unknown is how many of the more than 240,000 foreclosure filings initiated in South Florida since January 2007 are going to end up as bank repossessions," Zalewski said. "Right now, the ratio for repossessions-to-foreclosure-filings is about 38 percent and climbing."    Peter Zalewski of Condo Vultures® can be reached at 800-750-0517 or by email at peter@condovultures.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Don't forget to sign up for our weekly Market Intelligence ReportTM for detailed condo reports. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures DatabaseTM or view our Video Gallery. Looking for bulk projects direct from developers or lenders? Visit the Condo Vultures® Bulk Deals DatabaseTM. Our new books, the Official Condo Buyers Guide to MiamiTM , Official Condo Buyers Guide To South BeachTM, Official Condo Buyers Guide to Sunny Isles BeachTM, Miami's Great Condo Crash: A Chronicle of the Boom and BustTM , and the First-Time Home Buyers Guide To South FloridaTM are now available. Want to see every foreclosure filed in South Florida since 2007? Check out our Foreclosure DatabaseTM. Copyright © 2010, Condo Vultures® LLC

House approves homebuyer tax credit extension

By Tami Luhby, senior writerJune 30, 2010: 8:44 AM ET

NEW YORK (CNNMoney.com) -- The House of Representatives voted Tuesday to give first-time homebuyers three more months to close on their purchases and land an $8,000 federal income tax credit. But the Senate had better act fast - the deadline is currently Wednesday

The bill doesn't help anyone currently shopping for a home. Buyers must have signed a contract by April 30 to qualify for the tax break. At issue is when the deal must be finalized.

The House voted 409 to 5 to delay the closing deadline to Sept. 30 in a stand-alone measure. The move comes nearly a week after the Senate failed to advance a much larger jobs bill that contained the tax credit provision.

The smaller House bill would raise the deficit by $9 million over a decade. An estimated 200,000 people may miss out on the tax credit because they won't be able to close by close of business Wednesday. Many are trying to take advantage of short sales, which are complicated deals to complete.

The measure also seeks to reduce fraud associated with the credit. Some 1,300 prison inmates are thought to have claimed and received more than $9 million in tax credits, according to a Treasury Inspector General for Tax Administration report released earlier this month. The bill would allow the Internal Revenue Service to disclose tax return information to prison administrators.

Senate Democrats introduced a similar bill Tuesday, with Majority Leader Sen. Harry Reid, D-Nev., saying the measure "should be passed swiftly."

In a related move, the House failed to pass a measure extending the deadline to file for unemployment benefits until Nov. 30. More than 1 million people are estimated to have exhausted this lifeline since the deadline expired earlier this month. The provision, which would raise the deficit by $34 billion, was also included in the Senate bill that failed to advance last Thursday.

The House is expected to take up the legislation again on Wednesday. The Senate bill introduced Tuesday evening would also extend benefits through November. 

Home Affordable Modification
Many homeowners are struggling to make their monthly mortgage payments perhaps because their interest rate has increased or they have less income. A Home Affordable Modification will provide them with mortgage payments they can afford.

Home Affordable Foreclosure Alternatives
Many homeowners may feel that they can no longer afford their home, but want to avoid the negative effects of foreclosure. The Home Affordable Foreclosure Alternatives Program offers homeowners $3,000 to help transition to more affordable housing when they complete a short sale or deed-in-lieu of foreclosure.

For more details on the HAM and HAFA program and how it can benefit you and your client please feel free to contact me.

Colonial Guaranty & Title , Inc. located in Miami Fl is providing FREE Seminars on the 411 of these two programs...

Here is the Direct link for Elibality to the HAM or HAFA programs...

http://makinghomeaffordable.gov/eligibility.html

 

WASHINGTON - June 22, 2010 - More troubled mortgage borrowers are failing out of the Obama administration's foreclosure-prevention program than are winning permanently lower home payments, the government reported Monday.

Borrowers who qualify for the Making Home Affordable program receive a three-month trial modification, and if they stay current on payments, they can receive a permanent modification.

Over about the past year, 340,459 homeowners got permanent modifications under the Making Home Affordable program. But 429,696 trial modifications and 6,357 permanent modifications were canceled, often for reasons such as no income verification.

That means about 35 percent of the 1.2 million homeowners enrolled since March 2009 were later found to be ineligible or failed in the permanent modification phase, leaving some to question whether the $50 billion program uses taxpayer funds wisely.

"How much money are we spending for each modification?" says Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. "It's money for banks, not for homeowners. The money spent per homeowner to keep them in their home is going to be pretty high."

About half of homeowners who didn't qualify for a permanent modification still got alternative modifications worked out with their lenders, according to government data from the eight largest mortgage servicers. Seven percent wound up in foreclosure and 3.6 percent in bankruptcy, 9.8 percent brought their loans current, 1.1 percent paid off their loans, and 2.1 percent gave up their homes through a short sale or deed in lieu of foreclosure.

"The bulk of people in those situations are getting alternative modifications with reduced payments," says Herb Allison, assistant Treasury secretary.

The redefault rate among borrowers in the program is about 2 percent, officials said.

The number of trial modifications being launched is slowing. Just 30,099 trials were started in May, compared with 47,160 in April and 91,000 in January.

Allison says the administration is "well on track" to meet its goal of helping up to 4 million homeowners avoid foreclosure. Efforts such as servicers' alternative modifications are included in reaching that mark.

That could be confusing to some housing advocates who mistakenly thought up to 4 million homeowners would get a modification under the federal program, Baker said. But "I don't believe it was a deliberate effort to mislead."

Copyright © 2010 USA TODAY, a division of Gannett Co. Inc., Stephanie Armour. All rights reserved.

Economists speaking at the recent annual meeting of the National Association of Real Estate Editors said the housing market likely will not recover until 2013.

Stan Humphries, Zillow chief economist, said home prices continue to decrease, and he sees the "tremendous amount of shadow inventory" delaying recovery. "We think the market will be flat in nominal terms for three to five years," remarked Humphries. "We are not going to hit bottom and see a V-shaped recovery."

Meanwhile, Fannie Mae chief economist Doug Duncan said it will be another three years before new household formation and housing starts pick up. Duncan believes home prices will fall another 1 percent to 3 percent before bottoming out in the third quarter.

Both Humphries and Duncan said the federal home buyer tax credits shifted demand so that buyers took action earlier than they would have otherwise. "We're going to see a payback in July and August," noted Humphries.

Source: Inman News, Glenn Roberts Jr. (06/07/10)

© Copyright 2010 Information Inc.

 

Washington, June 22, 2010

Existing-home sales remained at elevated levels in May on buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates, according to the National Association of Realtors®. Gains in the West and South were offset by a decline in the Northeast; the Midwest was steady.

Existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2 percent from an upwardly revised surge of 5.79 million units in April. May closings are 19.2 percent above the 4.75 million-unit level in May 2009; April sales were revised to show an 8.0 percent monthly gain.

Lawrence Yun, NAR chief economist, said he expects one more month of elevated home sales. "We are witnessing the ongoing effects of the home buyer tax credit, which we'll also see in June real estate closings," he said. "However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales.

 "In addition, many potential sales are being delayed by an interruption in the National Flood Insurance Program. Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance."

As the leading advocate for homeownership issues, NAR is supporting Senate amendments to extend the home buyer tax credit closing deadline through September 30 for contracts written by April 30, and to renew the flood insurance program. "Sales and related local economic activity would have been higher without delays in the closing process or flood insurance issues," Yun noted.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.89 percent in May from 5.10 percent in April; the rate was 4.86 percent in May 2009.

The national median existing-home price² for all housing types was $179,600 in May, up 2.7 percent from May 2009. Distressed homes slipped to 31 percent of sales last month, compared with 33 percent in April; it was also 33 percent in May 2009.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said home prices have been stabilizing all year. "With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus," she said.

"Very affordable mortgage interest rates and stabilizing home prices are encouraging home buyers who were on the sidelines during most of the boom and bust cycle," Golder said.
    
Pending home sales are expected to decline notably in May and June from the spring surge, but Yun added that job growth and a manageable level of foreclosures are keys to sales and price performance during the second half of the year.
    
A parallel NAR practitioner survey³ shows first-time buyers purchased 46 percent of homes in May, down from 49 percent in April. Investors accounted for 14 percent of transactions in May compared with 15 percent in April; the remaining sales were to repeat buyers. All-cash sales were at 25 percent in May, edging down from a 26 percent share in April.
    
Total housing inventory at the end of May fell 3.4 percent to 3.89 million existing homes available for sale, which represents an 8.3-month supply⁴ at the current sales pace, compared with an 8.4-month supply in April. Raw unsold inventory is 1.1 percent above a year ago, but is still 14.9 percent below the record of 4.58 million in July 2008.
    
Single-family home sales declined 1.6 percent to a seasonally adjusted annual rate of 4.98 million in May from a pace of 5.06 million in April, but are 17.5 percent above the 4.24 million level in May 2009. The median existing single-family home price was $179,400 in May, which is 2.7 percent above a year ago.
    
Single-family median existing-home prices were higher in 16 out of 20 metropolitan statistical areas reported in May from a year ago. In addition, existing single-family home sales rose in 18 of the 20 areas from May 2009.
    
Existing condominium and co-op sales fell 6.8 percent to a seasonally adjusted annual rate of 680,000 in May from 730,000 in April, but are 32.6 percent above the 513,000-unit pace in May 2009. The median existing condo price⁵ was $181,300 in May, up 3.4 percent from a year ago.
    
Regionally, existing-home sales in the Northeast fell 18.3 percent to an annual level of 890,000 in May from a surge in April, but are 12.7 percent higher than a year ago. The median price in the Northeast was $240,200, down 2.2 percent from May 2009.
    
Existing-home sales in the Midwest were unchanged in May at a pace of 1.33 million and are 22.0 percent above May 2009. The median price in the Midwest was $150,700, up 2.2 percent from a year ago.
In the South, existing-home sales increased 0.5 percent to an annual level of 2.15 million in May and are 22.9 percent above a year ago. The median price in the South was $159,000, up 1.0 percent from May 2009.
    
Existing-home sales in the West rose 4.9 percent to an annual rate of 1.29 million in May and are 15.2 percent higher than May 2009. The median price in the West was $221,300, up 7.4 percent from a year ago.
    
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

Article source: Realtor.org

ORLANDO, Fla., June 22, 2010

- Sales of existing homes in Florida rose 18 percent in May, marking 21 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors®.

A total of 16,745 single-family existing homes sold statewide last month compared to 14,172 homes sold in May 2009, according to Florida Realtors. The statewide existinghome median price of $140,400 in May was slightly higher - by $300 - than April's statewide existing-home median price of $140,100. It marks the third month in a row that the statewide existing-home median price has increased over the previous month's median.

Across the state, a variety of housing opportunities continues to be available at attractive prices while mortgage interest rates remain historically low, said 2010 Florida Realtors President Wendell Davis, a broker with Watson Realty Corp. in Jacksonville. "Favorable conditions like this spark buyers' interest," Davis said. "However, like the rest of the world, Floridians are deeply concerned about the long-term ramifications of the April 20th explosion of BP's Deepwater Horizon oil rig, which killed 11 people and triggered the oil spill disaster in the Gulf of Mexico."

Seventeen of Florida's metropolitan statistical areas (MSAs) reported higher existing home and existing condo sales in May. A majority of the state's MSAs have reported increased sales for 23 consecutive months.

Florida's median sales price for existing homes last month was $140,400; a year ago, it was $143,800 for a decrease of 2 percent. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in April 2010 was $173,400, up 4.5 percent from a year earlier, according to the National Association of Realtors® (NAR). In California, the statewide median resales price was $306,230 in April; in Massachusetts, it was $295,000; in Maryland, it was $244,943; and in New York, it was $197,000.

According to NAR's latest industry outlook, factors such as a return of buyer confidence, stabilizing home prices and an improving economy are supporting the market in the federal homebuyer tax credit's wake. "The housing market has to get back on its own feet," said NAR Chief Economist Lawrence Yun, "and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs."

In Florida's year-to-year comparison for condos, 6,779 units sold statewide last month compared to 4,845 units in May 2009 for an increase of 40 percent. The statewide existing condo median sales price last month was $98,700; in May 2009 it was $113,500 for a 13 percent decrease. The national median existing condo price was $171,000 in April, according to NAR. Interest rates for a 30-year fixed-rate mortgage averaged 4.89 percent in May, close to the 4.86 percent averaged during May 2009, according to Freddie Mac. Florida Realtors' sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state's larger markets, the West Palm Beach-Boca Raton MSA reported a total of 887 homes sold in May compared to 737 homes a year earlier for a 20 percent increase. The market's existing home median sales price last month was $235,200; a year earlier it was $232,900 for an increase of 1 percent. A total of 877 condos sold in the MSA in May compared to 676 units sold in May 2009 for an increase of 30 percent. The existing condo median price last month was $99,600; a year earlier, it was $107,500 for a decrease of 7 percent.

 Two charts showing statistics for Florida and the state's MSAs are attached. One chart compares the volume of existing, single-family home sales and median sales prices in May 2010 to May 2009 based on Realtor transactions; the other compares the volume of existing, condominium sales and median sales prices in May 2010 to May 2009 based on Realtor transactions.

"Copyright RAMB, Reprinted with permission."

Having been on the buying and selling side of numerous short sales, I've encountered many things that can derail a short sale transaction. While many of these will be beyond your control, it's good to be aware of them before you list your home as a short sale or pursue a short sale as a buyer. 

1.  Buyer offers too little: Every buyer wants a deal. When you find a home you'd like to make an offer on, make sure your Realtor runs a CMA report (comparative market analysis) so that you'll know the current market value of the home. If the home is priced competitively and is in line with recent sales, I strongly advise making a full price offer, or an offer very close to full price, especially if you LOVE the home. This is beneficial for a couple of reasons. When your offer is submitted to the seller's lender, the lender will either hire an appraiser or get a few broker price opinions (BPOs) to determine the market value of the property. Lenders do strongly consider market value before making a decision. If your offer is fair, the lender is more likely to accept it without making a counter offer. If the lender has to give you a counter offer, it adds time to an already lengthy process. Secondly, because many lenders want to see all offers that come in on the property, if your offer is low, the seller and listing agent will be actively seeking higher offers. If a higher offer comes in, you could get bumped. In many cases, the listing agent will notify all parties that another offer came in and advise all parties to submit their highest and best offer. There's a chance you could retain your position but again, you've added time to the process.

2.  The seller changes their mind about selling: I just had this happen to some buyers I'm working with and there's really nothing you can do to avoid this scenario. The sellers decided to pursue a loan modification rather than do a short sale. I've also heard of sellers who were unemployed and needed to sell their home but then got employment and decided to keep their home.

3.  The lender wants the right to pursue a deficiency: Generally, in the state of Oregon, if your lender files a Notice of Default and pursues a non-judicial foreclosure on your primary residence, after the foreclosure sale, the lender has no right to a deficiency claim on your primary mortgage. (I am not an attorney and am not providing legal advice. If you are faced with this situation, please contact a real estate attorney to discuss.) What I'm seeing happen more and more frequently is that the lender approves the short sale but includes language in the approval letter reserving their right to pursue a deficiency. If the listing agent or the seller's attorney cannot get this language removed, the seller will often terminate the deal and let the property go to foreclosure. I have heard listing agents tell their seller clients that although the lender includes this language in the approval letter, it doesn't necessarily mean the lender will go after them. I think this is based on the fact that we're not seeing it happen very often right now. Keep in mind that the lender has up to 6 years to pursue the deficiency. Just because we aren't seeing it now does not mean they won't down the road. It's ultimately up to you to take your chances but I would never advise my clients to move forward with a short sale based on the fact that we haven't really seen lenders pursue the seller/borrower. The bottom line is, with that language in the approval letter, they can.

4.  The 2^nd lien holder demands more money: Many homeowners have 2 loans (or more) on their property. The 80/20 loan was very popular during the peak when home values were still rising. Let's say the current value of the property is $200,000 and the seller has a first loan in the amount of $280,000 and a 2^nd in the amount of $70,000. In this case, if the property sells for $200,000 the first lien holder loses $80,000 and the 2^nd gets nothing, unless the first lien holder agrees to pay the 2^nd something in order to facilitate the sale. Most often, the 2^nd would rather accept a payoff of around $5000 from the 1^st than let the property go to foreclosure and get totally wiped out. Sometimes they will hold their ground and take their chances because they plan to hire a collection agency after foreclosure to pursue the homeowner.

5.  The seller's lender determines that the seller has not truly suffered a hardship: Before the lender will agree to a short sale, the seller has to prove that they are unable to keep the property. There must be a hardship, typically things like divorce, unemployment, or overwhelming medical bills. Wanting to sell your house because you're underwater is typically not a hardship. The buyer may wait for 2-3 months for an answer only to have the lender deny the short sale because they determine the seller should be able to make payments and keep the home.

Unfortunately, you don't have much control over these things happening but you can prepare yourself. If you're considering purchasing a short sale, ask your agent to gather as much information as possible from the listing agent about the seller's situation.

1. Have the sellers truly suffered a hardship?
2. How many lenders are involved?
3. Is the seller committed to a short sale?
4. Will the seller accept and submit multiple offers to their lender?
5. Is the seller prepared to move forward even if their lender wants the right to pursue a deficiency? 

Short sales are no fun for anyone involved but they'll be around for quite some time. To make the process less painful, make sure you are using an experienced short sale agent, whether you're on the buying or selling side. A special designation is not necessary, but make sure you ask how many short sale transactions the agent has closed.