If you find yourself in the unfortunate position of not being able to make your mortgage payments on your primary residence, and the value of the loan is greater than today’s value of the home, you may want to consider a short sale after consulting with your attorney and tax advisor.
A short sale is the circumstance of selling a home for less than the mortgage balance.
Some short sales have taken as long as six to 18 months to complete.
Starting in April, many lending organizations may participate in a government program to streamline the short sale process.
This process is called the Home Affordable Foreclosure Alternatives or HAFA.
To be eligible for this streamlined short sale process, the property must be the primary residence, must have been purchased before 2009, the mortgage must be delinquent or at risk, the unpaid principle can be no greater than $729,750 and the borrower’s monthly payment must exceed 31 percent of gross income.
As stated, the program begins in April and is slated to end in 2012.
The deadlines for a lender who uses the HAFA program are quite timely when compared to the time frames we have witnessed with short sales.
The HAFA program gives the buyer and seller assurances that a transaction may be completed and not leave them hanging out there for months on end waiting for the lender to make up their mind.
In addition, a benefit to the seller is that under the HAFA program, the lender will give them $1,500 at the close of escrow to help with relocation costs.
Previously, the sellers normally received nothing but a bad mark on their credit report.
If there is a second mortgage on the property, the second mortgage holder will receive a lien reimbursement up to $1,000.
This may sound trivial; however, a second lien holder usually receives nothing if the property goes to foreclosure.
Another benefit to the seller is that during the HAFA process, the home may not be forced into foreclosure.
A representative of Bank of America explained that under the current short sale process, they have seen as many as 60 percent to 70 percent of sales fall out.
The process of a short sale is complex and time consuming and has caused them to increase their staffing levels by more than 1,000 percent in the last 18 months.
They stressed that buyers’ low-ball offers stress their system and are not entertained.
Their goal is to receive today’s fair market value for the distressed properties.
Ray Pugel is a designated broker with Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.