New Treasury Rules to Speed Short Sale Process
March 17th, 2010 Categories: Real Estate News
The U.S. Treasury Department, effective April 5, will institute new rules and procedures designed to speed the short sale process.
Short sales occur when a homeowner owes more on the property than the property is worth. The property is put on the market with the bank agreeing to accept the lower amount. (This is also know as being “upside down” on a mortgage.)
The homeowners walk away with nothing – except that they do not have a foreclosure on their record – and the bank recovers at least part of the money owed.
It sounds like a relatively simple system but most real estate agents, myself included, would tell you otherwise. Undoubtedly the banking system was not prepared for the rapid rise in short sales over the past two years, nor were uniform systems in place.
According to an excellent article in the Washington Post, sellers, going forward, can expect the following from participating lenders:
- Sellers must be unqualified for a loan modification or unable to afford the modification.
- The bank will set an acceptable value of the home upfront, based on an appraisal or broker’s price opinion.
- Lenders must approve or deny a purchase within 10 days of it being submitted.
- Once the bank approves a home for short sale, sellers may stop paying all related mortgage payments and unpaid mortgage debt will be forgiven.
- These mortgage payments will not be shown as late on credit reports.
- At closing, sellers are entitled to as much as $1500 from the government to cover relocation expenses.
Although unfortunate for the homeowner, short sales are an excellent way for first time home buyers to get into the market. If you want to know more about searching for short sales or if you are a property owner who needs to list a short sale, give me a call at 703.927.4554.
Michael
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