With so many homeowners faced with the possibility of having to either allow their homes to go to foreclosure, evenshort sales are facing difficulties. The length of time it takes for a short sale transaction can still cause a homeowner to lose his home to foreclosure, but new legislation has been introduced to speed up the process and thus prevent banks from foreclosing on homeowners.
Short Sale Legislation
On February 17, 2012 Senators Lisa Murkowski from Alaska, Scott Brown from Massachusetts and Sherrod Brown from Ohio proposed a bill that addresses the current length of time for short sales. They introduced the bill because of the number of the number of empty homes throughout the United States involving homeowners who have legitimate offers but are receiving a lack of responses from the banks. The bill is presently called the Prompt Notification of Short Sale Act and requires the lender to respond no later than 75 days after it receives a written request from the buyer. Under the terms of the bill if it is approved the lender must provide the buyer with the following;
Acceptance
Rejection
Counter offer
Need for extension
Estimated time for reaching a decision
In addition the servicing agency will only be allowed one extension up to a maximum of twenty-one days. If a servicing agency violates the act, the buyer will collect $1,000 in addition to reasonable attorney fees.
Justification for the Bill
A recent release from Short Sale New England indicates homes that are sold through short sales do not decrease the value of neighboring homes like foreclosed homes do. Additionally a 2012 Home Ownership Satisfaction Survey conducted by HomeGain indicated eighty three percent of short sale buyers are happy with their purchases.
The current short sale process takes so much time that many potential buyers walk away from a sale that could have prevented a homeowner from facing foreclosure according to Moe Veissi, the president of the National Association of Realtors. A survey that was conducted in 2011 provided indications from 71.9 percent of respondents that a short sale can take four to nine months to complete. It also showed that 18.2 percent of sales needed less than three months and ten percent required more than ten months.
Response from Realtors
The above-mentioned survey asked responses from agents about making improvements in the short sale process, and 57.6 percent believe lenders should not take so long to close transactions; fourteen percent said borrowers need to learn more about short sales; and 40.4 percent believe both of these changes are necessary in order to improve the process involved with closing short sales.
The current economic conditions clearly indicate there are changes necessary in the short sale process. Homeowners don’t want to lose their homes to foreclosure, but if banks become impatient when waiting for short sale contracts, that very thing will occur. This bill if it is approved will help not just traditional lenders but also hard money lenderswho may also want to become involved in financing short sales in a manner more efficient than traditional lenders currently do.