"Many homeowners who are potential Short Sale candidates have
been holding on and trying to work out a loan modification with their bank or
reinstate their loan.
Unfortunately, as well-intended as this is, it is working
against many homeowners in this current appreciating market. The
banks and mortgage servicers know that even if they incur the costs of
foreclosure (one of the biggest motivators for them to approve a Short Sale),
that in an appreciating market, time is on their side and they can offset
attorney fees, property rehab, etc. when the property value increases.
One of the more frustrating initiatives of Fannie Mae in
particular is their stated position of countering all offers on Short Sales at
10-15% over market value. Well, obviously this guarantees an appraisal
issue even if they can find a buyer willing to overpay for the
property.
If the Short Sale is not approved, then Fannie Mae in this case
repo’s the property and sells it as an REO (foreclosure). They are
consistently overpricing the REO’s congruent with their approach when the
property was a Short Sale, but, oh by the way, once it’s an REO, any buyer can
purchase it with Fannie Mae Homepath financing… and guess what, there is no
appraisal condition!! See the strategy here?
Specific changes got into effect on 8-1-13.
On it’s
face, the specifics of the release (that apply to agents and homeowners – many
of the changes apply to the services are simple enough: properties must stay
on the market for 5 days + a weekend before Fannie or Freddie will consider a Short
Sale. The implications however are that Fannie and Freddie are continuing
to demand sale prices that are unrealistically higher than market value
(10-15%), thus the additional marketing requirement.
On a
positive note, they have further streamlined the approval process, so if they
are going to approve, the process will be a little less “painful.”
The
purpose of all this is to:
1.
Quickly evaluate which sale type Fannie and Freddie will profit from more: Short
Sale or Foreclosure;
2. Clear
the properties they are not going to approve so they can
focus on getting the highest dollar amount on the properties they will approve.
The
bottom line to all of this is: if you are in a position where you think you may
have to Short Sale, give me a call so you can proactively decide what your next
steps are. Time is winding down on the non-taxability of forgiven debt
(was extended to 12-31-13), and banks and servicers are doing all they can to
take advantage of the appreciating market… which many times spells foreclosure
for the homeowner."
