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** READ THIS if your Las Vegas home is upside-down **
I have received several inquiries from friends and clients on the new government program (HAFA) to speed up and simplify short sales. You may have heard about the difficulty in getting them done (though they have been easier in recent months). The government has devised a program to do some of the work up front with the bank and the borrower (the seller) to ensure a much faster (less than 30 day) approval timeline for a short sale. I want to answer some FAQs for you – email me or call me at 702-895-7777 to discuss any further questions.
What is a Short Sale?
A short sale is when the bank agrees to allow you to sell your home for less than it is worth. If you owe $250,000 and the home is worth $100,000, the only way you can sell (short of paying the gap in cash) is to convince the bank to accept a short payment, low enough to close escrow. In this case, a $100,000 house, after closing costs, paying off a second mortgage enough to allow the sale, and any other liens, may only net $90,000. So the bank would have to agree to accept $90,000 on their $250,000 loan.
What Does It Cost?
It is free. The bank may ask for a contribution to complete the short sale if you don’t qualify for HAFA – ask me for more details on this. Your responsibility is solely to maintain the home (even if you are not living in it) until it closes.
Why Would A Bank Accept This?
Because our job is to convince them
A) the borrower (seller) can not continue making payments. This requires a hardship, some reason that your financial situation has changed from when you originally qualified for the loan. There are dozens of hardships that fit this criterion.
B) The bank would not get any more money in a sale at auction or post-foreclosure (as an REO) than they can right now with a short sale. To do this, we focus on getting a strong buyer and offer for the bank to consider.
What is HAFA?
Home Affordable Foreclosure Alternatives Process. I have attached a timeline to show how this process will streamline short sales. Where as in the past they have taken several months to close, they now should take less than 30 days. The HAFA program will aid homeowners in avoiding foreclosure by providing financial incentives to lenders and homeowners, and enforcing timelines on every step of the short sale or deed-in-lieu of foreclosure process.
How is a HAFA short sale better than a standard Short Sale?
There are incentives to the lender to participate in the program and to aid the homeowner with relocation (they will give you cash to help you move!)
Most importantly, with HAFA, the bank must waive the deficiency (which is the gap between what you owe and what the bank gets after the short sale), and the bank can not require a promissory note or cash contribution.
Can Anyone Apply for HAFA?
Like all government interventions, there is a downside. You must live in your home, your lender must participate (ask me if yours does). It also does not apply to second mortgages (they are paid a set amount by the first to accept the short sale).