When it comes to the market of distressed property, short sales are going like hot cakes and they are expected to become even hotter in the weeks to come because the government will be shelling out money to encourage lenders to close the deals.
Because of this, banks have increased their approvals of short sales and now hire tons of people who have had experience with the industry of mortgage-lending to make them work with short shales.
Transactions wherein lenders let homeowners sell their homes for a lower amount than they actually owe made up 17% of every residential sale of real estate in February – 4% more than the amount in November. Even the Bank of America, which is the biggest mortgage servicer in the country, has doubled the amount of their processed short sales within the last few months. And they approve them much faster, too.
This is definitely a massive change compared to how things were in the short-sale market half a year ago. Since lenders could lose a lot from such transactions, they were very reluctant about accepting short sales and really took their time – usually around six months – before contacting potential buyers again.
Things have definitely changed since then. Banks now realize that they do financially better with short sales rather than foreclosures. Lenders lose around 50% on foreclosures and a mere 30% on short sales. Plus, short sales provide a means of getting rid of distressed properties much faster.
Now, there is also a new program called the Home Affordable Foreclosure Alternatives program, where borrowers can earn $3000 on relocation incentive, while servicers get $1500 for handling each short sale.
The investors that own the actual mortgage notes get $2000 for sharing the short sale proceeds with second-lien holders, who in turn get $6000 for the release of the claims.
Because of this program, a boom in short sales is expected, which could end the crisis of foreclosure by getting rid of the overhang of distressed borrowers and putting stable homeowners in their stead. Plus, this will make the sales for distressed borrowers better since their credit scores will not suffer as much as foreclosures make them.