Short Sale Time Frame 

  The economic forecast for 2010 predicts that our market will see more and more short sales in the coming months.  Again, a short sale is when the owner of a property has a higher mortgage balance than the mortgage payoff, and sells for market value. Banks will sometimes forgive the rest of the debt in order to facilitate the sale if the seller has a hardship and cannot meet his obligation. This is a better option than foreclosure for the seller and the bank. As more of these properties flood our market, the backlog for lenders processing approvals has grown. So, if you make an offer on a short sale property, be prepared to wait for a response.  

The good news is that a new program outlined on December 1st by the Treasury Department put a time limit (10 days) for a response and added financial incentives for the buyers and sellers.

In the past homeowners would be stuck for months waiting for the banks response to approve their short sale and in many cases losing the interest of the potential buyer.

Still, questions linger. Some real estate agents doubt the guidelines will be enforced, while bankers wonder whether 10 business days is enough time to reply to offers. 

While short sales are considered an ideal solution for banks and for ``under water'' homeowners on the verge of foreclosure, the deals often dragged on as lenders in the past would typically take months to decide what to do.

Frustrated buyers walk away during the delays. In some cases, lenders insist that borrowers share in the financial loss, holding up the transactions even longer. As a result, homes stay on the market longer, and in many cases fueling the foreclosure market.  

Aside from imposing a 10-day deadline, the Treasury rules call for sellers to receive $1,500 moving allowances, and the sellers will not have to repay any of the debt.

Also, lenders will get $1,000 to cover administrative and processing costs, while investors owning the mortgages will receive a maximum $1,000 for allowing up to $3,000 in short sale proceeds to be distributed to less senior lenders.

AFFECTED BANKS

The 83 loan servicers participating in the Obama Administration's Home Affordable Modification Program, including Bank of America and JPMorgan Chase, are required to follow these guidelines for all borrowers who request short sales or who did not complete loan modifications.

The rules do not specifically apply to loans guaranteed by Fannie Mae or Freddie Mac, which represent about half of all U.S. mortgage debt. The government-run mortgage companies are working to finalize their guidelines.
The Treasury plan, which must be implemented by lenders no later than April, is meant to help sellers listing their short sales.