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Short
Sales On Properties With Conventional Loans
Beginning April, 2010, the Home Affordable Foreclosure Alternatives Program
(HAFA) and its recently issued guidelines should help to streamline
the process of lender approval of short sales and reduce the backlog that is plaguing lenders now.
Not only should the process be shortened dramatically, it will also mean less vacant and vandalized properties, a common problem in neighborhoods everywhere.
What sellers can expect from
participating lenders starting in April:
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Sellers must be unqualified for a loan modification under the Home Affordable Mortgage Program or be unable to afford the modification.
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The bank will set an acceptable value of the home upfront, based on an appraisal or broker's price opinion.
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Lenders must approve or deny a purchase offer within 10 days of it being submitted.
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Once the bank approves a home for short sale, sellers may stop paying all related mortgage payments, and unpaid mortgage debt will be forgiven.
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These mortgage payments will not be shown as late on credit reports.
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At closing, sellers are entitled to as much as $1,500 from the government to cover relocation expenses.
Here
are some links to additional information regarding the HAFA plan
Home Affordable Foreclosure Alternatives Program
Details
HAFA
Changes
Short
Sales On Properties With FHA-Insured Loans
Here is a summary of the requirements
and limits to perform an FHA-insured HUD Short Sale:
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You must be delinquent 31
or more days at the time of sale.
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You must list the property with
a Licensed Real Estate Broker who is not related to you in any
way. It must be an arms length relationship.
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You must actively market the property for four months (up to six).
For the first 30 days of marketing, the short sale lender (mortgagee) may only approve offers that will result in a minimum net sale proceeds of 88% of the "as-is" appraised Fair Market Value (FMV). During the next 30 days of marketing, the lender may only approve offers that will result in minimum net sale proceeds of 86% of the "as-is" appraised FMV. For the rest of the marketing time (60 days), the lender may only approve offers that will result in minimum net sale proceeds of 84% of the "as-is" appraised
FMV.
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The property must be an owner-occupied, except for cases of job transfer, death, divorce, job loss
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There should be written proof of your decrease in income showing inability to pay the
mortgage.
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HUD will pay up to 1% of buyer's mortgage as part of closing costs if the new mortgage is also FHA, plus reasonable "seller" costs
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HUD allows 6% Realtor commission
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HUD will not pay for Home Warranties, points or lender's title insurance
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You must get approval to participate in the HUD Pre-Foreclosure Sale Program in advance
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Upon acceptance into the program, you will be given
a Approval To Participate Form, which will outline program restrictions
Here are some links
relating to HUD short sales.
HUD Short Sale (Pre-Foreclosure) Sale Program.
HUD
Frequently Asked Short Sale Questions
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