Like many of her colleagues, Chicago Realtor Carol Grobman has been wondering for a long time why the real estate community at large, and the federal government in particular, have not made a move toward relieving the prolonged short sale process that has been trying the patience of their sellers and buyers alike.
Since the real estate bubble burst back in 2007 many Realtors have been avoiding short sales altogether, either due to lack of training, or simply to avoid the hassle involved.
“Why are they taking six months to make a decision? By then the original buyer is gone. A lot of people can’t afford to wait because they have to move,” Grobman said.
Well, the federal government has finally answered back, adding another acronym to its list of government-sponsored programs. This one is called HAFA (it stands for Home Affordable Foreclosure Alternatives) and is part of the Home Affordable Modification Program (HAMP).
HAFA: The Government Response
Hoping to positively influence the nation’s housing market by shortening and simplifying the short-sale process, the Treasury Department released new guidelines for servicers late last year.
Under those directives, HAFA offers servicers and borrowers incentives for utilizing a short sale or a deed-in-lieu to avoid foreclosure on any loan that is eligible under the HAMP program thereby reducing the need for a potentially lengthy and expensive foreclosure process.
Key features of the program include:
- Sellers/borrowers can receive up to $1,500 for relocation expenses
- Lenders will receive $1,000 for each completed short sale
- Up to $1,000 for investors who allow up to $3,000 in short sale proceeds to be distributed to subordinate lien holders.Borrowers can receive pre-approved short sale terms prior to the property listing
- Borrowers are fully released from future liability for the debt
Shifting Short Sale Strategies
Both the popularity and thorniness of short sales are evidenced by the existence of Short Sale Pros, a San Diego Web-based company promoting itself as a solution for real estate professionals, investors and homeowners trying to navigate the short sale negotiation process.
“Homeowners are starting to realize that loan modifications aren’t as great as they thought they were going to be. From the loan modification end, if you can’t help with that then the short sale is the next logical thing,” said the company’s president, Michael Corradini.
As Corradini explained, negotiating short sales comes down to how a potential homebuyer, investor or real estate professional approaches the bank and presents the numbers. One tip he suggests when negotiating a short sale: show the bank the difference between your offer and an estimate of what they will net if the property goes to REO.
Finding short sale bargains on RealtyTrac
RealtyTrac members can easily identify potential short sale bargains on RealtyTrac using the following steps. Get a 7-Day Free Trial Membership.
- Search any county, city or zip code nationwide.
- Click the Pre-Foreclosure or Auction tab on the search results.
- Click the “Status” column to sort all for-sale properties to the top.
- Click the “FOR SALE” icon to view the listing and foreclosure details.
- Compare the List Price to the First Loan Amount and Est. Market Value to determine if the property represents a potential short sale bargain.