Short Sale Myths vs Reality: Closing Time

Many agents and buyers have shied away from short sales because they hear horror stories about them taking 3-6 months to close.

Here's a reality check: In the hundreds of short sales we've closed, the time from mutual acceptance to Lender Consent has averaged 60 days. If someone is inexperienced with short sales, that process can take considerably longer. Short sales require significantly more paperwork than a traditional sale, and if you don’t have a system for collecting and submitting that paperwork to the lender according to their individual requirements, things can really bog down. Many large lenders use a platform called Equator for all aspects of the short sales process, from submitting paperwork to ongoing communication. For those not familiar with Equator, getting up to speed on the software will also prolong the sales process. Most brokers we work with prefer to spend their time building their core business, and leave the short sale negotiating work to short sale specialists with a dedicated staff that handles all the details.

Major Changes Coming to HAFA

As of June 1, there will be significant changes to the HAFA program. The updates will allow a homeowner to remain current on their mortgage, qualify for HAFA, and go through a short sale with less of an impact on their credit.

The major changes include:

▪ The deadline for submitting for HAFA eligibility will be extended a full year, from December 31, 2012 to December 31, 2013.

▪ The removal of occupancy requirements: HAFA until now has required homeowners to have lived in the property within the last 12 months. This requirement is being removed.

▪ The $3,000 relocation incentive will be limited to properties occupied by an owner at the time of the short sale.

▪ Mortgage payments will be allowed to exceed 31% of the homeowner’s gross monthly income. The effect of this will be to allow a homeowner to remain current on her mortgage and still qualify, minimizing the overall potential impact to her credit, and certainly shortening the waiting period to purchase in the future.

▪ Junior lienholders may receive up to a maximum of $8,500, up from $6,000 previously (these are incentives to junior lienholders).

▪ There are also new mandates regarding what the lender can state on the borrower's credit report that, reportedly, will lessen the impact on the borrower's credit rating.

We'll post any new information as we receive it. We have more information about HAFA here.