Short sales continue in 2010

— Sean F., Las Vegas

A: I appreciate your question and agree that short sales are generally better than foreclosures for our community and our housing market.

For those who don’t know, a short sale is when a property sells for less than what is owed on the mortgage.

As you may know, the short-sale process has not been working well over the past few years for buyers, sellers and others involved.

Short sales have been a cumbersome process, sometimes taking a year or more of negotiating with the lender. That’s really not acceptable for most buyers and sellers. Sellers don’t know where they stand and what the outcome will be and buyers don’t want to wait a year to move in to a home.

Like most people, I’d like to see a much more progressive, organized short-sale system that works quickly, efficiently and leads to the best possible outcome for all parties.

Fortunately, there are some recent developments in this area.

First, local housing statistics show that short sales are increasing as the number of home sales involving foreclosures are decreasing. I think that’s a good thing.

Secondly, in early December, our team at the Greater Las Vegas Association of Realtors received our first copy of the newly released guidelines and forms related to shorts sales from the U.S. Treasury Department and its new Home Affordable Foreclosure Alternatives Program.

This directive is not the final solution to this issue, but it is definitely a step in the right direction. It creates a standardization process for banks that choose to participate. I think it also cleans up a lot of the problems we have had with lengthy timelines.

HAFA is a complex program designed to simplify and streamline the use of short sales and deeds-in-lieu of foreclosure. The program does not take effect until April 5, but loan servicers may implement it before then if they meet certain requirements.

Federally backed mortgage giants Fannie Mae and Freddie Mac are releasing their own versions of HAFA.

In any case, the National Association of Realtors played a major role in formulating many of these guidelines. I appreciate NAR helping real estate agents and homeowners who have felt ignored and even abused by their lenders.

Here are some ways this program will help homeowners and Realtors:

* It will provide a streamlined and standardized way to conduct a short-sale and deed-in-lieu.

* It uses the borrower’s financial and hardship information already collected in connection with consideration of a loan modification.

* It allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

* It requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

* It uses standard processes, documents, and time frames/deadlines.

* It provides financial incentives encouraging short sales. These include $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).

Real estate professionals and others considering a short sale can find more information at hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf. Once there, download the document entitled, Supplemental Directive 09-09, Introduction of Home Affordable Foreclosure Alternatives — Short Sale and Deed-in-Lieu of Foreclosure. This form contains the qualification requirements for homeowners, the required sample letters for Realtors to provide clients and the timetables required of borrowers.

I hope this helps. For more information about such issues or about the GLVAR, consult a qualified local Realtor or visit lasvegasrealtor.com.

Rick Shelton is the president of the Greater Las Vegas Association of Realtors and has worked in the real estate industry for 20 years. GLVAR has 13,500 members. To ask him a question, e-mail him at ask@glvar.org. For more information, visit lasvegasrealtor.com. Questions may be edited for space and clarity.