Short Sales Process Has Been Aided By 45-Day Requirement For Banks To Respond To Short Sale Requests; Sellers Eligible For Up To $3,000 In Aid (Video)

The short sale system has been simplified by the Obama Administration. The Treasury Department unveiled rules requiring banks to respond to homeowner short sale requests within 45 days. Short sale sellers are also eligible for up to $3,000 in aid to move. By some estimates up to 275,000 foreclosures could be prevented by these efforts.

Homebuyers Should Not Avoid Short Sales But Have Patience And Few Contingencies With Purchase Financing

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• Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss.  To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale.  Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.
• Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price.  According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.
• Home buyers wanting to purchase a short sale must have patience.  In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours.  With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases.  It may take 30 days or longer for a buyer to receive a response from the bank.
• In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home.  In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.
• Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or forego an inspection altogether.
• Even with the challenges associated with short sales, buyers should not avoid these transactions. 

For more:  http://realestate.aol.com/blog/2011/08/11/short-sales-are-they-worth-the-trouble/

The “Looming” Shadow Inventory In USA’s Top Ten “Larger Counties” Will Add A “Glut Of Homes” Listed For Sale As 98% Of Delinquent Homeowners Will Be Forced Into Foreclosure Or Short Sales; 30% Of “Seriously Delinquent Homeowners” Have Not Made A Payment In 24 Months

 

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Ten Larger Counties Distressed Mortgage Percentages – 3d Quarter 2010
COUNTY	Active Loan Count	90+ Days Delinquent	% Delinquent	Defaults	% Defaults	Distressed Total
Miami-Dade	366,775	26,735	7.29%	64,708	17.64%	24.9%
Broward (Ft. Lauderdale)	328,721	21,939	6.67%	44,251	13.46%	20.1%
Orange (Orlando)	204,944	13,020	6.35%	24,839	12.12%	18.5%
Clark (Las Vegas)	360,192	32,932	9.14%	32,388	8.99%	18.1%
Riverside (CA)	368,432	32,622	8.85%	17,965	4.88%	13.7%
Prince George’s (MD)	148,228	13,800	9.31%	6,367	4.30%	13.6%
San Bernardino (CA)	315,992	27,051	8.56%	14,980	4.74%	13.3%
San Joaquin (Stockton, CA)	105,519	8,887	8.42%	5,021	4.76%	13.2%
Kern (Bakersfield, CA)	114,247	8,031	7.03%	4,929	4.31%	11.3%
Maricopa (Phoenix)	715,944	43,164	6.03%	31,807	4.44%	10.5%

Source: CoreLogic

• The ten large counties with the highest total percentage of first liens which were either seriously delinquent or had been placed into default
• These are properties which had not yet been foreclosed and repossessed
• Historical data suggests that 98% of these properties will eventually be forced onto the market as either foreclosures or short sales
• The total number of seriously delinquent and defaulted first liens in these ten counties is somewhat higher because database does not include all first liens
• This represents the so-called “shadow inventory” of properties that will come onto the market in the not-too-distant future and will add to the glut of MLS listings
• In February 2011, according to Lender Processing Services, an incredible 30% of seriously delinquent homeowners in default had not made a mortgage payment in at least 24 months
• In January 2009, that number was only 8%

For more:  http://seekingalpha.com/article/268087-shadow-inventory-threatens-all-major-metro-housing-markets

“Short Sale Or Foreclosure”: Homeowners Will See FICO Scores Fall To 570-595 Range With Either Strategy; Credit Scores Will Take Up To 7 Years To Increase Back To Previous Levels

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• FICO will not be higher if homeowners choose “short sale” over foreclosures
• Mortgage delinquency data from the nation’s three major credit bureaus was used to make this decision
• Potential borrowers with short-sales will have FICO scores in the 575-to-595 range at one credit bureau
• This is  the same as having a foreclosure on their credit report
• FICO scores will be either in the 570-to-590 range or the 620-to-640 range at the two other credit bureaus
• Short sales and foreclosures will remain on credit reports for three-to-seven year credit restoration

For more:  http://www.housingwire.com/2011/04/22/short-sales-and-foreclosures-equally-degrade-fico-scores

“Short Sale Or Foreclosure”: Homeowners Who Short Sale With No Default On Loan Face The Least Negative Impact On Credit; Must Wait 3-7 Year With Foreclosures And Defaults

 

Short sale with FHA Loan

• Can purchase right away with no mortgage default
• 3 year wait if in default at the closing
• Reduced wait if the borrower has re-established good credit and can show extenuating circumstances

Short Sale With Fannie Mae Loan

• 2 year wait if the borrower puts 20 % down
• 4 year wait if the borrower puts between 10% to 20% down
• 7 year wait if the borrower puts less than 10% down
• 2 year wait if the borrower can show extenuating circumstances and puts more than 10% down

Short Sale with Freddie Mac Loan

• 4 year wait before being able to get a loan
• 2 year wait if the borrower can show extenuating circumstances

Foreclosure with an FHA Loan

• 3 year wait before being able to get a loan
• Reduced wait if the borrower can show extenuating circumstances and re-establishes good credit

Foreclosure with a Fannie Mae Loan

• 7 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
• 7 year wait for a 2nd home, cash out re-financing, or an investment property

Foreclosure with a Freddie Mac Loan

• 5 year wait from the completed foreclosure sale date
• 3 year wait if the borrower can show extenuating circumstances

** As a side note a deed in lieu of foreclosure follows the same guidelines as FHA’s foreclosure policy, the same as Fannie Mae and Freddie Macs short sale policy.

For more:  http://massrealestatenews.com/buying-a-home-after-short-sale-or-foreclosure/?goback=%2Egde_87042_member_47792412

California “Short Sales” Continue To Be A “Difficult” Homebuyer Process As Only 60% Close While Typical Response Time Exceeds 60 Days And Can Be Up To 6 Months

 

• Fewer than three of five short sales close in California according to the California Assoc. Of Realtors (C.A.R.)
• 94% of the Realtors in the survey participated in a short sale transaction during 2010
• They cited lenders and servicers unresponsiveness, onerous procedures, and long processing delays
• 70% of Realtors said closing their most recent short sale transaction was “difficult” or “extremely difficult,”
• Reasons for this included:

1. Lack of standardization
2. Long approval process
3. Lack of lender approvals

• The process should be 45-days
• Typical response time for lenders is at least 60 days
• Many times their response time exceeds 6 months
• 63% of Realtors said that lenders took more than 60 days to return a written response of the approval or disapproval
• Only 4% said they received a written response in less than 14 days