Posted by Michael Hughes February 19, 2010
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If you have a home for sale in Boulder, a short sale as it were the lender agrees to take less than the full amount the homeowner owes on the mortgage. The transaction is saying that the value of the house is lower than the amount due, sometimes significantly so.
These deals appeal to homeowners, not so much (yet) for banks. The homeowners’ credit score and ability to borrow will be damaged, but not as much as if the house goes into foreclosure. And the IRS is not that forgiving on what is considered unearned income or deficiency judgement (the difference between what you owe and the distance between that and what is accepted by the bank). HAFA may remedy that.
The easiest short sale is one where there is only one lender. Easy being the operative but relative word. Short sales to this point have not been easy nor fast. When there are two or more lenders it is almost impossible to get them to come to agreement on which parties will receive how much.
If the banks would just enlighten up and start accepting these offers the log jam of short sales and foreclosures would soon be behind us. Short sales are definitely less costly than a full blown foreclosure and they are quicker.
Foreclosures still outnumber short sales but (short sales) are the only way we can get these inventories lower and to what the new “normal” as far as supply and demand (absorption) will be when the dust settles. The shell shocked confidence of Americans is playing into this big time.
The Treasury’s HAFA program will probably increase short sale activity significantly. Under HAFA, the lender settles on an approved price in advance. A lender must provide “Either a list price approved by the servicer or the acceptable sale proceeds, expressed as a net amount after subtracting allowable costs that the servicer will accept from the transaction.” This will help speed up the transaction and minimize short sale fraud.
Under HAFA, the servicer must “allow a portion of gross sale proceeds to be paid to subordinate lien holders in exchange for release and full satisfaction of their liens.” That helps with the 2nd lien problem and is great for the homeowner because there will be no deficiency judgment (also, upon closing, the first mortgage holder has to agree to release the borrower “from all liability for repayment of the first mortgage debt”). This is much better than “walking away”! Take action before it is too late and you are going in to foreclosure. Call me today. You can avoid foreclosure. It is a matter of take the band aid off quick or remove it hair by hair. Which would you prefer?
HAFA starts on April 5, 2010 and is limited to homeowners with an unpaid principal balance less than or equal to $729,750.
If you NEED HELP WITH A SHORT SALE or have questions regarding this article or Boulder Real Estate please call me 303-359-6627 or e-mail Michael Hughes at Fuller Sotheby’s International Realty in Boulder, CO