Will 2010 be the year of the Short Sale
Short sales, when the proceeds of the sale are less than what is owed on the mortgage, have been difficult at best for buyers to successfully purchase but that may change as banks are starting to be more responsive and are agreeing to short sales as a less costly alternative to foreclosures.
One reason is that all the government efforts to get banks to loan modifications has been nothing short of a dismal failure. Many of the modified loans have reverted to default only delaying the foreclosure process. Some borrowers are unable to even qualify for a loan modification and principal reduction creates moral hazard.
Something had to change.
But the new HAFA program from the Treasury Department due to begin on or before April 5, 2010 will probably significantly increase short sale activity.
Under HAFA, the transaction will be quicker because the lender must approve a sales price in advance. One of the biggest stumbling blocks to successfully concluding short sales was that the buyers grew tired of waiting and withdrew their offers as lenders dragged their feet for months without approving the sale. A problem with subordinate liens is addressed by requiring servicers to allow a portion of the proceeds to subordinate lien holders "in exchange for release and full satisfaction of their liens".
The LA Times has more, Short sales grow as a cheaper alternative to foreclosures.
Here's a tip for Charleston home buyers interested in buying distressed properties, whether they are foreclosures or short sales. You can get a good deal but you are not going to steal a home. Even though prices have declined somewhat in the Charleston real estate market, the banks still have a pretty good idea of the value of properties. So it's not likely that you are going to be able to buy for pennies on the dollar (or even 50 cents).
But good deals are available. Contact me or call 843.343.3004 for more information.