While the amount of time it takes loan servicers to decide to accept a short sale has shortened considerably, it can still be frustrating to go through the process only to have the servicer determine the seller doesn’t qualify.
I’m not talking about rejecting the offer or making a higher counter offer. Both of those keep you in the game as the buyer. You can decide whether to make a higher offer. But when the seller doesn’t qualify, the game is over. You’ve wasted your time and had your money sitting idle on the sidelines with no hope of completing the deal.
For that reason, it’s prudent for you to prequalify the seller before entering negotiations with the loan servicer. Not all sellers are going to be willing to share their financial information with you. You need to walk away from those that won’t. There are too many opportunities in today’s market for you to waste time with an uncooperative seller.
With more and more short sales coming on the market, there are more realtors becoming involved in the process. Many lack experience with the short sale rules. At the same time, most sellers think a short sale is the answer to their mortgage nightmare but what they don’t know is they don’t qualify for a short sale.
Unfortunately, the rules are complex and there is still not an industry standard process. The closest there is to a standard is the Home Affordable Foreclosure Alternative (HAFA) process. Here are the highlights of the process:
• The mortgage must have been written prior to January 1, 2009.
• The seller must have attempted to qualify for a loan modification under the Home Affordable Modification
Program (HAMP). This means either applying for but not qualifying for the program or initially qualifying but failing to stay current with mortgage payments.
• Financial and hardship information obtained during the loan modification process can be rolled forward to the short sale process.
• Allows but does not require loan servicers to pre-approve short sale terms before listing the property.
• Requires the property to be listed with a real estate professional.
• The property must be the primary residence or have been vacant or rented out for less than 12 months. Long-term rentals and vacation properties aren’t going to qualify.
• There must be a genuine financial hardship experienced by the seller.