New Federal Initiatives on Short Sales Will Improve Bank Approval
Federal initiatives on short sale approvals by banks are being implemented to combat the epidemic of foreclosures in the Baltimore area. On April 5th the Obama administration is rolling out its Short Sale assistance program.
Short sales are becoming a new alternative for homeowners who fear of foreclosure. Bankers now seem more than willing to negotiate to make a deal work before a homeowner goes into foreclosure status.
The goal of the short sale is to prevent the troubled homeowner's property from entering in voluntary foreclosure process. This will prevent mortgages from entering real estate owned status (REO).
"Once these federal initiatives are in place to make short sales easier for seller and buyer, the market will start stabilizing"
Negotiating a successful short sale with a bank on a home or other real estate may be a grueling task that could take months to achieve.
So, what is a short sale? What does it mean for the troubled homeowner and the potential buyer? First, let's address the latter question. For the homeowner, a short sale involves telling the lender your financial situation and requests them to accept less than you owe. Our advice is to be upfront with the lender of your current financial status.
What does this process involve for the troubled homeowner?
• You must contact the loan servicing center of your mortgage provider. Loan servicing centers are not banks. They are collectors of your payment on behalf of your mortgage provider.
• Troubled homeowner's these loan servicing centers will want documentation of your current financial situation. This will involve submitting a financial statement to the lender. A financial statement is the total of all your bills not excluding what you pay in groceries and gas for your vehicle.
• Placing the home on the market, finding a buyer, and offer that is needed.
• Dot every 'I' and cross every "T" in the paperwork involved because there is a good deal of it.
• Keep the property maintained and track your bids from potential buyers. The higher the bid means you could possibly end up owing nothing on the property and help get your short sale approved from the bank that much quicker.
• Finally, you wait for the approval process form the interested buyer or investor and the lender.
"The homeowners of these short sales properties should keep them well maintained to make these properties attractive to potential investors or first-time home buyers," said Skeeter.
What do short sale properties mean to potential investors or first-time buyers?
• Traditional lending institutions (banks) are taking an average 4 to 6 months before approving these properties. This means a buyer must put in an offer relatively early to start this process before even being considered by banks.
• Make multiple offers for short sale properties that you are interested in purchasing and just wait. The more offers means you are increasing your chance of shortening the bank's turnaround time of 4 to 6 months.
• These properties are highly maintained due to the owner's incentive of getting the short sale approved. For the investor and first-time buyer, you could be getting prime property with little to reinvest back into the property.
• Seek a professional in guiding you through the short sale process because they know where these properties are located as well as the deals you are looking for.
“Consumers should know that short sales only happen when a lender agrees to accept less than what is owed on the mortgage. Some lender will negotiate short sales, and others will not. As a mortgage holder, it is best to contact the lender’s loss mitigation department to find out first,” said TJ Noye, Precision Funding.
These new federal initiatives will cut the long process from getting answer back from the bank, which can be from three to six months. An estimated 8 to 12 percent of all bank assisted short sales work, which is good news for Baltimore homeowners fearing foreclosures.
For more information about short sales, please contact Pillar Property Group and speak to one of our representatives.