New short sale program designed to help

The new Home Affordable Foreclosure Alternatives Program (HAFA) took effect this month and is designed to help streamline the short sale process. 

Short sales are sometimes referred to as “pre-foreclosure sales” and up to now have been characterized by long bureaucratic delays and frustrated would-be buyers and sellers.

45 page HAFA download makes things simpler?

HAFA is intended to fast-track and regularize the short sale process. 

But it is an extremely complex program.  It’s supported by a daunting 45 page download of rules and forms, so get ready for some heavy reading.

Know the rules and use the right forms

Not all distressed homeowners will qualify for the program and whether HAFA succeeds or fails to make short sales quicker and easier remains to be seen.

But what’s important for prospective short sale sellers and buyers alike is that you may now have standard forms to use and uniform rules lenders and servicers must abide by. 

So the real estate agent helping you better be up to speed on this important new program or you may still encounter disappointments in your efforts to either sell or buy a home via a short sale.

Helpful links

Here are some links to information on both the loan modification and short sale programs; just click on the icons below:

Insightful video

The following video is geared towards real estate agents but is helpful to anyone thinking of selling or buying via a short sale:

For more help and guidance

Please contact me to discuss your individual needs relating to any short sale; I have experience in short sales that will prove helpful to you!

Copyright ©2010 02038.com

Click the link to learn more about what short sales are and how they have helped distressed home sellers get out from under their onerous mortgage debt burdens.

BusinessWeek claims that many lenders now are reluctant to consent to short sale requests. 

Some lenders withhold consent unless short sellers come up with significant extra money at closing.  Other lenders reportedly are demanding that short sellers sign a promissory note in return for the lenders’ approval of the short sale.  You can read the entire BusinessWeek article here.

5.6% of MA homes for sale are “short”

Only 5.6% of all single family home listings in Massachusetts are short sales, according to data maintained by MLSPIN, the dominant MLS in MA.

The numbers stay roughly the same if you look only at the Greater Boston metro market.  In Franklin, MA only 5.4% of all single family listings are currently “short”.

Given that short sales comprise such a small percentage of all single family homes currently for sale in Greater Boston and the overall MA real estate market, the increased lender resistance to short sales reported by BusinessWeek does not seem likely to be a major problem in this state. 

Many more short sales in old mill towns

But the percentage of short sale listings gets a lot higher when you look at the economically downtrodden Massachusetts mill communities and inner city markets.

Short sales in Brockton comprise 21.5% of all active single family listings in Brockton on MLSPIN.  It’s only slightly better in Lawrence (18.8%), and Lowell (16.1%) and other hard-hit markets. 

So the new mortgage lender resistance to short sales reported by BusinessWeek may become a very significant problem in the still-depressed mill town and inner city markets in the Commonwealth.

More of a problem with multi-family homes

The short sale picture is even grimmer in the MA multi-family market. 

Roughly 15% of all multi-family listings in Massachusetts are short sales on the MLSPIN system.

And the numbers soar into the low-to-mid 30% range in cities such as Worcester, Brockton, and Lawrence.

More foreclosures coming?

The large numbers of “upside down” home owners in these inner city markets seem primed for trouble if lenders are now tempted to obstruct their short sales as the BusinessWeek article suggests.  

If lenders refuse to cooperate with short sales in these depressed markets, more distressed MA home owners seem headed towards foreclosure.  Quite a surprise given all the recent good news about MA real estate and the Massachusetts economy in general. 

The real question may become whether the foreclosing lenders will, once their new REO properties hit the market,  net more money than they would have had they continued approving short sales in lieu of foreclosure auctions.

Copyright ©2009 02038.com

One of my recent listings was a short sale which successfully closed May 22, 2009.  The seller was in a very tough financial situation, being unable to make the monthly payments on his mortgage loan and owing roughly $140,000 more than his home was realistically worth.

After months of the delays and bureaucratic bank bundling so typical with short and REO sales we got the bank’s approval of the sale last week and closed within a few days. 

The result was a home seller able to start a new life free of a crushing debt burden with his credit mostly intact and a home buyer who got a good deal by being very patient and understanding about the repeated closing postponements we had to endure at the hands of the lender.

Here’s what the home seller had to say:

“I can’t tell you how relieved I am. This has been a long and arduous journey and your help and guidance during every step has been nothing short of remarkable.  It would have been next to impossible to get this done without your continued assistance. You went above and beyond your normal role to ensure there were no delays from my end.  Kindly accept my heartfelt thanks for a job well done.”

The lender won also, because it very likely netted substantially more at the short sale closing than it would have received as a REO seller after an expensive foreclosure sale.

So if you are in financial trouble, a short sale can be the intelligent, proactive way to shed debt, avoid foreclosure and salvage your credit rating.

Copyright ©2009 02038.com

This amazing quote is from an irate employee of an affordable housing organization trying to buy a foreclosed home. 

The man wasted weeks of time and effort dealing with the seemingly overworked and overwhelmed loss mitigation department of a major lender.  The department didn’t even know the bank didn’t have ownership rights to this home, one of the hundreds of foreclosed properties it was trying to sell! 

This cautionary story appears in the current edition of Banker and Tradesman, the respected Massachusetts real estate trade publication. 

It illustrates the nightmare of frustration and wasted time sometimes encountered by buyers seeking to buy REO (bank-owned) property.

Quoting again from the article:

“Lenders have been woefully unprepared to deal with the administration and listing of their properties; often, they aren’t even aware that a property is theirs.”

A look at the numbers helps explain why REO lenders are often so dysfunctional with the management and sale of foreclosed properties: there are approximately 5000 REO properties currently in Massachusetts, according to The Warren Group, publisher of Banker & Tradesman.  Of those, about 1,700 are being administered by US Bank and Deutsche Bank, the two largest servicers of REO properties in the state.

That’s a lot of homes to handle!

When you add in the 1000s of short sales that are currently ongoing in MA, you can imagine how much potential there is for misunderstandings, delays and mistakes while trying to negotiate a transaction with the loss mitigation staff of a lender.

While there are good deals to be had with REO homes and short sales, just beware that many buyers are reporting frustrations and blown deals due to the inability of the lenders to cope with all the bad mortgage loans that keep landing on their doorsteps.

Copyright ©2009 02038.com

Some buyers hear “short sale” and assume they’ll get an outrageously advantageous sale (as suggested by the photo above). 

But a short sale itself does not guarantee good deal for buyers.  Just because the owner owes more on the property than the home is currently worth does not mean that the home is a compelling buy. 

Most short sale listings appear on the MLS well BEFORE the lender approves the sale. 

Think about it: the owner needs to submit an offer to the lender before lender can be asked to allow the short sale.  And with lenders dealing with countless thousands of bad mortgage loans, response times are often measured in months, not days.

So there’s a good chance that your offer on a short sale listing may consume many weeks of your time with no guarantee that the lender will approve the sale at the price offered by you. Quite a few attempted short sales end in foreclosure.

Location, condition and price make for a good or bad deal, not the seller’s motivation for the sale, or the degree of his financial distress. 

A short sale of a home in a bad location or with lots of structural defects may end up being a poor purchase.

So don’t let your pursuit of a good deal blind you to whether the home is really right for you.

Copyright ©2009 02038.com