Short Sales to Be Fast Tracked After April 5th
Buyers to want a deal on a Short Sale should mark April 5, 2010 in their calendars. On that date the federal government will fast track the short sale process and buyers can expect to get quicker answers to their offers to buy a distressed property where owners are working with their lender on a "short sale"
Gone are the days where a seller offereing to sell their home for less than the amount owed on the mortgage had to wait for months to find out if a buyers offer, for less than the list price, would be accepted by their lender. Buyers just could not wait this long and the uncertainty made the process very cumbersome. Some lenders never gave a response and others reponded with unreasonable counter offers.
On April 5th the federal government has put financial incentives in place for lenders to do more short sales and to make the process easier for a buyer to navigate.
From the Wall Street Journal:
"Under the old practices, when a financially-distressed seller brought a potential buyer who was offering less than the amount owed on the loan, the bank would order an appraisal or broker's price opinion (BPO) and then decide whether the offer was acceptable. Under the new federal rules, banks will order a BPO before the property is listed for sale, and will share information on the minimum net proceeds they're willing to accept with the sellers. If they then bring in a buyer whose offer is equal to or greater than this pre-approved amount, the lender must accept it within 10 days.
Not all sellers are eligible for this program, called Home Affordable Foreclosure Alternatives (HAFA) (for the requirements see Help for America's Homeowner's Supplemental Directive 09-09). But since the process is likely to go so much smoother for those who buy and sell under HAFA, I suggest you wait a bit until the program goes into effect and concentrate on finding these "pre-approved" deals.
Of course, when you do find a property you like, you may not be the only person bidding on it. To improve your chances of winning, make sure your offer is "clean," with as few contingencies as possible (though I would never forego a home inspection). Include tax and credit records, and a mortgage pre-approval letter. If you can afford to pay cash, that will put you in an even stronger bargaining position
Still, in your eagerness to win the property, don't forget that distressed properties often come with added financial burdens. Although under HAFA, the seller is supposed to provide clear title, to protect yourself your, your contract must make it clear that you will not be responsible for any of the seller's unpaid property taxes, liens or second trusts. Also, cash-strapped homeowners often stop paying taxes and homeowners' association fees during the time between when the house is listed and the deal is closed. To make sure that you're not on the hook for these expenses, Leonard P. Baron, professor of finance at San Diego State University, recommends that you ask that the bank escrow at least six months worth of taxes and HOA fees, to cover any potential shortfall."
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