Speeding up the Minnesota short-sale process

In recent years, homeowners struggling to keep up with their mortgage payments have turned to shorts sales in a last ditch effort to avoid foreclosure. According to the Minneapolis Area Association of Reatlors, there were 11,136 short sale listed in 2009, which is 12% jump from 2008. Anyone involved with a short sale (buyers, sellers, real estate agents, title companies, etc.) know that the process is extremely time consuming, full of pitfalls, and never a sure thing. In fact, it’s estimated that only about 35% of purchase agreements for short sales actually result in a closed transaction.

Perhaps as a sign that the government is realizing that its modification program isn’t having the desired results, a new program called Home Affordable Foreclosure Alternatives (HAFA) was rolled out this week. It’s designed to streamline the process by enticing banks with financial incentives so they are more responsive to offers. The idea behind the program is to reduce the likely number of foreclosures by allowing underwater sellers to take a lesser hit to their credit by going with a short sale instead.

The new program stipulates that sellers will fill out a short sale agreement form and submit it to their lender. Lenders are supposed to review and pre-approve the short sale terms and state an acceptable price range. Once an offer is made, the lender has to 10 days to respond with either an approval, denial, or a counteroffer. This essentially flips the waiting from the back end to the front end because there are no set time limits to pre-approve the terms. So it could result in frustrated sellers who are anxious to list their property for sale. The 10 day window is great for buyers because there now should be less waiting after they submit an offer. Buyers will now know that the list prices for shore sales are already within an acceptable range for the bank. Previously, a home would be listed and once an offer was received, it was submitted to the bank for review but with no set timeframe.

The ultimate key for the success of this program is the cooperation of the lenders and desire to adhere to the 10 day guideline. Many major loan servicers, such as Wells Fargo, have voiced a desire to streamline the process but many of the smaller may not be on board.

Have questions about the process or wish to explore it because of your situation? Contact me today and I can help evaluate the best options for you.

Tags: Sell, short sale