Ignore Foreclosure with a Short Sale Mortgage

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Foreclosure has become the “it” word when it comes to the real estate market recently and has been responsible for a lot of people finding great deals on homes but a lot of others being forced out of those same homes. It is not the be all and end all when you are struggling to make mortgage payments, and that is especially true now that a new federal program is aiming at making short sales a much more beneficial process.

Whether you are looking for a new home or trying to sell yours, the Home Affordable Foreclosure Alternatives Program (HAFA) is something that you simply have to familiarize yourself with sooner rather than later.

HAFA and the new rules that come along with it will come into effect on April 5th, 2010 and is targeted at simplifying the short sale process overall. Essentially, the regulations demand that the market value for homes is established before homes are listed and that the lenders are only given a 10-day window to reject or accept offer proposals.

These regulations are aimed at homeowners that can no longer afford to pay their mortgages and essentially provides them with an ‘out’ in terms of selling their home, rather than having to go through the whole tedious and emotional foreclosure process. On the other hand, HAFA should also help to stabilize the housing market and can end up being beneficial for home buyers as well.

Just imagine the benefits that will come with the ability to complete a short sale, obtain clear title, and get into a home without all the usual delays that slow down the process.

What is a Short Sale?

In most instances, a short sale takes place when a certain bank permits for a home to be sold for less money than the outstanding balance on the mortgage. This allows homeowners that can’t keep up with their mortgage payments to get out of their deal without the devastating consequences that come with foreclosure or bankruptcy. It also benefits the lender as it allows them to cut down on their overall potential losses. Short sales bring in more value than a foreclosure because the process is far less expensive and essentially hassle-free.

Delving Deeper into Short Sale Regulations

The process for a short sale begins when the lenders agree to the stipulations and then have the home appraised to establish its fair market value. The lender then lists the property at a price that they are willing to accept and have up to 10 days to accept or reject all of the offers that subsequently come in.

The ten-day limit tackles the major issue that is currently involved with short sales, which is the lengthy delay that lenders put into place when receiving offers. The process has usually consisted of a buyer making an offer, the lender evaluating the home and the offer, and then making a final decision that can be spread over a 3 to 6-month timeframe, or even longer.

Short Sale Advantages for Buyers

Probably the biggest advantage that comes with the new regulations is the fact that buyers will already know the established and acceptable price set forth by the lenders. This makes it a lot easier to shop around and compare short sale properties and come up with reasonable offers, rather than just estimating a price and throwing around numbers. As well as the aforementioned advantages, buyers are now given clear title to the property once everything goes through, thanks to the removal of all established liens.

If you find yourself to be at risk for foreclosure and cannot qualify for a permanent loan modification program, then you should do your research and then take advantage of the Home Affordable Foreclosures Alternatives Program.

Keep in mind that the program does not take effect until April 5th and that it may take some time for lenders to evaluate applications for the programs and the current value of certain homes. This means that we as consumers and homeowners may not see an increase in short sales until at least May or June. Even still, it could be a great idea to start looking for short sales early to ensure you are prepared to jump on a great deal if you find one or take advantage of the new option if your home is weighing you down.

The HAFA program is slated to run through to the end of 2012, but may be extended if the response is overwhelming and the housing market still needs a push in the right direction.