Almost every day, I receive this question from potential customers, friends, and even family members. Many people are perplexed with what to exactly do when faced with not being able to pay their current mortgage and housing payments. Have no fear! Banks and the government are FINALLY starting to get their acts to together.
Short sales are on fire in the distressed property market. In the not so distant past, short sales could take 6-12 months or longer to even come to fruition. A short sale is when a homeowner owes more on the mortgage than the property is worth. As a result, the bank agrees to sell the home short of what the borrower owes on the mortgage.
Unfortunately, these potential transactions turned into “long sales,” as the process took countless months of trying to get the bank to agree to the short sale but to no avail. But, banks are starting to organize themselves better by hiring more mortgage professionals to help in their short sale negotiating departments. As a result, short sales account for almost a quarter of all real estate sales in the first quarter of 2010 and will continue to grow.
Specifically, Bank of America, who holds the most residential mortgage loans in the country has recently started using an online program called Equator to process not only their bank foreclosure properties (REO’s), but now their short sale inventory. Short sales now offer the banks an easier solution to getting properties quickly off their books. Also, short sales are becoming a better financial options for banks. When a bank forecloses on a property, it can cost them up to 50% of the home’s worth in fees and carrying costs. Short selling can cost the banks 20%, which is a significant difference!
Under the new Home Affordable Foreclosure Alternatives program rolled out by the government earlier this year, distressed borrowers will now earn a $3,000 “relocation incentive” to help with moving costs. Servicers of loans will also receive $1,500 for handling each short sale.
The goverment program also helps investors that own the mortgage notes with $2,000 in exchange for working with the second-lien holders and sharing the proceeds of the short sales. Finally, the 2nd lien holder will now receive up to $6,000 for releasing their claims and allowing the short sale to take place. This last incentive is truly helping expedite the process, as 2nd lien holders demanded a lot of money from the proceeds and would “kill the deal.”
Many banks are also providing release of debts to distressed homeowners at the closing of the short sales. In a recent Sun-Sentinel article, analysts expect a barrage of lawsuits to recoup the mortgage debt loss from borrowers that walked away from their homes. “Under Florida law, banks have 5 years after they finally foreclose on a home or after the deficiency judgment and up to 20 years to collect. Lenders and banks can make claims on borrower’s assets and even garnish wages.
It is very important to learn the facts from an experienced real estate professional and real estate attorney. Know your rights! Your bank has an attorney, and so should you! Short selling your property also allows you to clean up your credit faster and actually enable you to purchase a new home in as little as a few years instead of 7 years or more if you had a foreclosure on your record.
Please give your South Florida short sale experts a call today at 954-609-0591. Our team is here to help answer any and all of your questions and concerns and to discuss all of your options.
To stay updated with all of the current Parkland real estate home information, receive our blog posts directly to your inbox by subscribing to the squawk.
If you are interested in buying or selling a real estate property in Parkland or South Florida, please give us a call at 954-609-0591 or send a note to the squawk.