If you are a buyer, seller or Real Estate Agent....there is something you should know about Short Sales.
There are four types and you need to know what type of Short Sale you are entering into if you are going to buy one, sell one or become one.
I have been doing Short Sales for the last five years, have even been written up about them in several magazines but I learned something new recently. Here are the four types of Short Sales you need to be aware of:
- The Traditional Short Sale: this is the one most Realtors have been helping homeowners who are in trouble sell their home for less than what is owed on their mortgage. The lender or investor approves the seller, accept the contract offer and it closes...eventually. (sometimes taking months, some stretching into a year..yikes!)
- The U.S. Treasury Short Sale...this is the one with the alphabets..called HAFA (Home Affordable Foreclosure Alternative) whose guidelines were released in November 2009 and recently updated February 1, 2010. It has many advantages for Sellers, Realtors and Buyers. A.For Sellers, they may receive $3000 relocation assistance. B.The Foreclosure sale must be suspended while eligibility is determine. Sellers cannot be required to sign a note or pay any additional amounts to satisfy liens. C.The Short Sale is Pre Approved. This takes more time on the front end of the transaction, but less time after a purchase contract is accepted by the seller, a big advantage for buyers of short sales. D.Purchase agreements are approved or denied within 10 business days. Servicers are now required to communicate approval, disapproval, or a counteroffer no later than 30 calender days after receiving a sales contract, a Alternative Request for A Short Sale and a signed Hardship Affidavit. If the short sale is not successful, a deed in-lieu of foreclosure may be possible with the seller receiving $3000 relocation assistance or being able to lease the home back at below market rent if it is a Fannie Mae loan.
- The Fannie Mae HAFA Short Sale. The same criteria is used as the U.S. Treasury if Fannie Mae is the investor, but there are some differences. The home cannot be vacant for no more than 90 days (one year on US Treasury), MORTGAGE cannot exceed 31% of borrowers gross income. Fannie Mae also deals with subordinate lien holders differently than the US Treasury. The big difference is Fannie Mae will allow the seller to lease the home back from them at below market rents to keep property occupied.
- The Freddie Mac HAFA Short Sale. If Freddie Mac is the investor, the seller may be required to continue to pay monthly payments equal to 31% of the borrowers monthly income. Also you must apply for the HAFA approval before you get a contract or you will wind up doing a traditional short sale.
The trick to all of this is to know which kind of Short Sale the seller is eligible for. Most HAFA short sales can be entered into the Equator system. The first thing you must do is find out who the Investor is on the mortgage note. You can now find that out through the Fannie Mae and Freddie Mac websites to determine if they have ownership. For a list of participating servicers and to learn more about these programs go to www.makehomeaffordable.gov. Learning these programs can make short sales easier for everyone. Short Sales are here to stay for awhile...they have gone mainstream.