Short Sales and the effect curent on the housing market
The national government sponsored Short Sale program aimed at helping struggling homeowners sell their homes and boosting sales is also pushing home values lower in the process.
Many real estate professionals said the Home Affordable Foreclosure Alternative (HAFA) Program, which aims to streamline the short-sale process in an attempt to reduce foreclosures
Many areas of the country are reporting anywhere from 25-40% of all transactions are now linked to a short sale.
.Short sales, transactions in which a lender accepts a payoff less than the balance due on a home loan, have become more common as the housing market soured.
If a seller is not found during the short-sale term, homeowners can deed their homes back to their lender in lieu of foreclosure.
According to California-based research firm CoreLogic, about one in four homeowners nationally owe more than their homes are worth..
"We have to reduce that property inventory (before) the market returns to full health," said Mark Fleming, CoreLogic's chief economist. Though the foreclosure alternative program should speed that process, it's one that Fleming said will still take two to three years.
Short sales historically go for 10 percent to 20 percent less than market value, and while it is a distressed sale of sorts, it is an arm's length transaction on the open market that will be used as a comparison for future sales. Price drops will be most severe in neighborhoods with the highest concentrations of delinquent loans.
The extent to which the foreclosure alternative program catches on remains to be seen, as the new program is still finding an audience with homeowners and real estate agents. The impact on community banks also may be mixed.
The Obama Administration's Home Affordable Foreclosure Alternatives Program, which officially launched Aug. 1, seeks to streamline and standardize the short-sale process to help banks and homeowners avoid foreclosure. The program includes incentives for qualified homeowners and real estate professionals:
• Homeowners can receive up to $3,000 in relocation costs. This incentive makes it less likely that owners will damage a house on the way out, common in foreclosures.
• Homeowners are released from future liability after the home is sold or deeded back to the bank in lieu of foreclosure, meaning they can't be held responsible for the lender's loss on the loan.
• Servicers cannot ask real estate agents to discount their commissions.
• Servicers can receive incentives from $1,500 to $2,200 for successfully completing a short sale or deed-in-lieu-of-foreclosure.
• Secondary lien holders can get up to 6 percent of the outstanding principal balance, awarded in order of lien priority, with an aggregate total of $6,000 to all lien holders.
Many real estate professionals said the Home Affordable Foreclosure Alternative (HAFA) Program, which aims to streamline the short-sale process in an attempt to reduce foreclosures
Many areas of the country are reporting anywhere from 25-40% of all transactions are now linked to a short sale.
.Short sales, transactions in which a lender accepts a payoff less than the balance due on a home loan, have become more common as the housing market soured.
If a seller is not found during the short-sale term, homeowners can deed their homes back to their lender in lieu of foreclosure.
According to California-based research firm CoreLogic, about one in four homeowners nationally owe more than their homes are worth..
"We have to reduce that property inventory (before) the market returns to full health," said Mark Fleming, CoreLogic's chief economist. Though the foreclosure alternative program should speed that process, it's one that Fleming said will still take two to three years.
Short sales historically go for 10 percent to 20 percent less than market value, and while it is a distressed sale of sorts, it is an arm's length transaction on the open market that will be used as a comparison for future sales. Price drops will be most severe in neighborhoods with the highest concentrations of delinquent loans.
The extent to which the foreclosure alternative program catches on remains to be seen, as the new program is still finding an audience with homeowners and real estate agents. The impact on community banks also may be mixed.
The Obama Administration's Home Affordable Foreclosure Alternatives Program, which officially launched Aug. 1, seeks to streamline and standardize the short-sale process to help banks and homeowners avoid foreclosure. The program includes incentives for qualified homeowners and real estate professionals:
• Homeowners can receive up to $3,000 in relocation costs. This incentive makes it less likely that owners will damage a house on the way out, common in foreclosures.
• Homeowners are released from future liability after the home is sold or deeded back to the bank in lieu of foreclosure, meaning they can't be held responsible for the lender's loss on the loan.
• Servicers cannot ask real estate agents to discount their commissions.
• Servicers can receive incentives from $1,500 to $2,200 for successfully completing a short sale or deed-in-lieu-of-foreclosure.
• Secondary lien holders can get up to 6 percent of the outstanding principal balance, awarded in order of lien priority, with an aggregate total of $6,000 to all lien holders.
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