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Improved Short Sale Process

By C. J. Coury

The Short Sale phenomenon that has been escalating over the past few years has reached the point where some drastic changes are needed.

Today’s most prominent process model for these transactions requires that an offer to purchase be presented to the servicing lender prior to any action being taken to obtain investor approval of the reduction in their pay-off. This, coupled with servicers being woefully understaffed, has had an enormously negative impact on all parties involved in the transaction and has, in fact, contributed to a reduction in the median sale price of homes.

The good news is that the process is beginning to change is a very positive way. Many lenders are now initiating the process with their under-water customers who can no longer afford to keep their home. By thoroughly vetting the homeowner in advance they are able to eliminate the need for the buyer and agents to remain on hold during this time consuming process so that the home can be marketed and closed on quickly once a qualified offer is presented. This will place the short sale property in a similar situation to a move-in condition REO thereby eliminating the negative impacts that are currently inherent with these transactions.

In addition to lenders redesigning their own processes for initiating short sales there is a new government sponsored initiative taking effect on April 5, 2010 – Home Affordable Foreclosure Alternatives (HAFA). In addition to the up-front initiation of the process as mentioned earlier, this initiative includes many components that will help to move short sale purchases through more quickly. These features include but are not limited to:

• Cash incentive to servicer for implementing the process
• Guaranteed recovery amount to subordinate lien holders
• Relocation funds and assistance to displaced homeowners
• No deficiency judgment or promissory note for investor short fall

Please begin encouraging your customers to contact their lenders to discuss the possibility of a pre-approved short sale prior to listing the property. If available to them it will ensure a smooth and timely closing absent of the angst and aggravation now associated with traditional short sale transactions.

C. J. Coury is a Senior Vice President with Bank of America and oversees their residential mortgage division serving Sarasota, Manatee and Charlotte Counties. Prior to joining Bank of America in 1995, C. J. was President of Mortgage Brokers of America in Birmingham, MI for 7 years. He has been an active mortgage finance professional since 1983. C. J. may be reached at (941) 952-2888 or by email at charles.j.coury@bankofamerica.com.

Copyright © 2010 REAL Magazine

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