Foreclosures and the Market

The Oval Office has revamped the foreclosure rules yet again. Maybe this change will work since the program has been largely a failure prior to this. Effective April 5, 2010 the following rules will apply to HAFA short sales. 

• Allows the borrower to receive pre-approved short sale terms from the Servicer prior to the property listing. These terms are clearly spelled out in a standard Short Sale Agreement form (SSA) provided by the Servicer and agreed to by the seller.  The SSA includes the list price or identifies acceptable sale proceeds which are expressed as a net amount after subtracting allowable costs that the Servicer will agree to. The minimum net amount in the SSA may not be increased until the initial Short Sale agreement termination date is reached (this is not less than 120 days). Servicer may choose to extend the Short Sale Agreement up to a total term of 12 months.
• Requires that borrowers be fully released from future liability for the first lien mortgage debt.
• Uses standard processes, documents, and time frames.
• Provides a $1,500 relocation allowance to the borrower following a successful short sale.  Servicers and investors receive government financial incentives as well.
• Within three days of receipt of an executed purchase offer, the borrower/listing agent submit to the Servicer a Request for the Approval of Short Sale (RASS) form complete with
  • Executed sales contract and addenda
  • Buyers documentation of funds or lender  preapproval or commitment letter
  • Information on status of negotiations with subordinate lien holders
• The Servicer must approve or disapprove the sale within ten business days by signing the RASS and mailing it to the borrower.  This should speed things up!
• Here's the specific language from the new directive as it applies to commission, "The Servicer may not require, as a condition of approving a short sale, a reduction in the real estate commission below the commission stated in the SSA."   (The commission cannot exceed 6%.)

According to the AJC, we had a 24% drop in foreclosures this month over last, and a 4% drop compared to last year. Hopefully that signals stabilization for this troubled market sector.

As for Pickens County, our sales for March indicate an increase of 76.9% over 12 months and 27.8% over 15 months. Our newly pended contracts were up 18.2% over 12 months but down slightly over 15 months. It is troubling to me that the number of homes for sale is creeping back up while Metro Atlanta shows a sharp decline. One of the problems we face is the large inventory of homes for sale in a slow market. Based on sales, we currently have 23.4 months of inventory compared to metro's 10.7 months, which tends to diminish values. However, compared to 73 months of inventory in February 2009, we're making progress. The general consensus among agents seems to be that unit sales are improving. You can sell your home if it is priced correctly, but sometimes the "if" is a very large elephant sitting in the middle of the room.

Unfortunately, the commercial market looks worse with no end in sight. The fear is that the next round of foreclosures in that area will cause more lender problems and failures.