Short sales for the third and fourth quarter of 2012 reported a record high, according to a report by the Federal Housing Agency.  In fact, short sales and deed in lieus were up 23 percent from the prior year 2011 while REO inventories were down by 36 percent, from their peak in 2010.  Source:  Inman News short_sales

So… to what do we owe this increase in short sales?  Are the banks being more cooperative or have they finally come to their senses? Well, the culprit could be the length of time it is taking to negotiate and close a short sale.  Whereas before the banks had few trained experts and representatives to streamline the process, or the majority seemed they were “in training”, today, “as soon as a short sale is submitted to the lender, almost instantly assigned Short Sale Specialist reaches out to us” says Jacqueline A. Salcines, Esq, an attorney who devotes half of her real estate law practice to selling and negotiating the short sales on behalf of her clients.  “There is no longer that short sale abyss we witnessed in 2011 and the beginning of 2012. The banks finally got their act together and we are seeing them close as soon as 45 to 60 days from submission”.

Most of the credit also must be given to sweeping change in legislature and regulations. On November 1, 2012, Fannie Mae and Freddie Mac instilled new directives that streamlined short sales including

  • Mortgage servicers had to make a decision on the short sale within 30 days from receipt of the application.
  • Mortgage servicers were required to confirm receipt of the short sale application within three days of submissions
  • Weekly updates to the agents became mandatory
  • Mortgage servicers could approve short sales without having to wait for PMI approval
  • Offering additoinal incentives to homeowners for moving costs in the sum of $3,000.00

Source: ” The Shorter Short Sale: Long on Borrower Benefits”  Freddie Mac Executive Perspetives BLog (Jan. 22, 2013)

Additionally, many dont know that they qualify for a short sale even if your home is worth over a million dollars or the loan to be paid off is a Jumbo Loan, or you are a foreign national.  Short sale rules and regulations have become very “realistic” to not sue the word “lax”. But, all in all, mortgage giants like Fannie Mae and Freddie Mac, as well as most lenders, have realized the cost of foreclosing and taking on an REO propertys far surpass that of short selling. The proof is in the amount of incentives they continue to give the borrowers, sometimes as much as $26,000.00, even in 2012!

The most important tool whether your are buying or selling a short sale continues to be… DONT GO IT ALONE.  Employ a qualified real estate attorney to review and examine title, specially if the home is in foreclosure, review liens oon the property, encumbrances, as well as handle the negotiation between the borrower and the short sale lender. “I am always astounded when clients come to me and tell me they have been negotiating their short sale without an attorney for the past 12 months without any closure in sight.  It is no surprise that either the short sale is not approved, or more informaiton is required, endlessly or worse, a denial is made that is not merited.  This is when the services of an attorney/accountant are of most value.”  Jacqueline A. Salcines, Esq.

Whether you want to gracefully exit or immediately dump a property you can no longer afford, call us to run your finanicals and see if a short sale is in your future.