What is a Short Sale and How will New Legislation Affect You

What is a Short Sale and How Will the New Legislation Affect You?

In the past, “short” sales were far from actually being short, if at all. However, now that federal legislation has taken place, there are some changes that will be implemented. These changes will affect sellers who qualify, and if executed properly by lenders, has the potential to reform the short sale process.

By definition, a short sale is when a lender agrees to accept an offer from a buyer that is less than what the seller owes on the mortgage. One of the most prevalent dissatisfactions about the short sale process for homeowners trying to sell is the amount of paperwork involved and the time it takes lenders to make a decision about them. Under the new legislation, for sellers who qualify, loan servicers would have to accept or deny the offer within 10 business days. Lenders would also have to give sellers the maximum price they will accept before the listing goes up. In addition, under this new program, sellers would not have to pay the difference between the mortgage and sale price. All second mortgages and liens would be forgiven.

For a homeowner to qualify for this new short sale program, they have to prove it is their primary residence, have a first lien mortgage originated before 2009, and their mortgage must be delinquent, or a default must be reasonably predictable. In addition, their unpaid principal balance must be no more than $729,750, and their total monthly payment must exceed 31 percent of their gross income.

If you have any questions about the short sale process for your Tampa real estate, please contact us at 813-345-4158 and one of our team members will guide you through the process.

Tampa Foreclosures

There doesn’t seem to be an end to foreclosures in our near future. The rates fluctuate from quarter to quarter, but the houses keep coming! Lately, I hear a lot of stories of people owing twice what houses are selling for in their neighborhood. A lot of people choose to let their house go back to the bank, even if they can afford it. Although most people I talk to agree there will be a continuous saturation of foreclosures in the Tampa market for the next 2 years, I think it’s interesting that wholesale prices have been steady the past several months.

Helping to hold the prices steady is the foreclosure process. Courthouses are backed up for 12 months in some cases and lenders getting ownership of a property through foreclosure is no longer a fast process.
The slow foreclosure process is one reasons why lenders are now agreeing to short sales at lightning speed compared to two years ago. A short sale provides the lender a quick out of their problem loan, and gives them fast cash. Sure, the money they get from a short sale is often half what they originally lent out, but compared to a loan that they are not being paid on, it’s a good option!

Years ago, when a property owner, a realtor, or a short sale “expert” called a lender in attempt to negotiate a price reduction, it was a maze of voice mail and email messages. Now when you call a lender, you’re likely to easily get in touch with the Loss Mitigation department on your first try. Lender’s have people trained to help get these negative assets off their balance sheet. It is a good idea to research your bank prior to negotiating a short because each lender has it’s own policies for qualifying for them to take a loss on a loan. You will be able to submit information in a way that appeals to the lender, and may get an approval faster!