Many real estate agents, buyers (both experienced and new), and sellers can find it hard to say that they fully understand the real estate short sale process. Each bank has their own “process” or “guidelines” in place for short sales which can has made the short sale process increasingly difficult or mystifying to all parties involved. Banks will hold all the cards even after a short sale offer is submitted.

Many involved in the process can agree that there is NO logic in the short sale process and NO one time-line to be followed (a contributing factor as to why many short sales fail). In fact, the typical home selling/buying process is completely thrown out the window leaving everyone except the bank insecure in the future of the deal.

It’s important for buyers of short sales to remember that submitting an offer to the bank with a response deadline, even an offer with the listing price offered, doesn’t guarantee a speedy response from the bank or lender. There are no deadlines once an offer is submitted.

Recently, the Obama administration created a modification to the existing mortgage foreclosure program to streamline the short sale process to assist lenders, real estate professionals and homeowners to close short sales. Unfortunately the new guidelines fall short to accomplishing their intended goal and participants in short sales grow frustrated due to the long delay period which accumulates interest, taxes, insurance, maintenance and expenses.

In short sales, the purchase price is less than the amount needed to pay off the outstanding mortgage. The lender must agree to waiving the deficiency or negotiate with the borrower a settlement amount.

The Obama administration has attempted to address short sale concerns:

1) Borrowers with 2nd home mortgages or investment properties are eliminated from the program.
**Borrowers are excluded which represent a large portion of those affected by the foreclosure crisis. It’s estimated that more than 50 percent of loans in foreclosure have 2nd mortgages.

2) The short sale seller must apply and qualify for the mortgage modification program.
**This requirement creates more red tape for a home sale that doesn’t require a modification to the mortgage.

3) $1,000 “incentive” for a lender to participate in the short sale.
**A $1,000 benefit to a lender is a marginal benefit in their books.

In short, the administration must provide positive and proactive procedures to hasten banks to close on short sales and thus, avoid more foreclosures entering the market.

Tags: banks, investment properties, lenders, mortgage foreclosure, real estate professionals