U.S. Treasury Coming Out With New Rules For Short Salesby
A story in this week’s magazine follows up on our blog posting from two weeks ago about banks getting tougher on folks looking to sell their homes for less than what they owe and get the lender to eat the difference—a process known as a short sale.
We mentioned in the magazine article that the U.S. Treasury is expected to issue rules soon aimed at streamlining the short sale process. Housing industry consultant John Burns tips us off to some of the new rules. The Treasury Dept. will offer subsidies, $1,000 to the mortgage servicer and $1,500 to home sellers to encourage short sales. The fees, he notes, are designed to incentivize the servicer for the extra work and get the seller to leave the house quickly and in good condition.
Of course, servicers and sellers aren’t the real reason short sales take so long and often fall apart. The problem lies with the lenders or mortgage investors who, justifiably, don’t want to take the kind of hit that is often necessary to sell a house in today’s market.
Government incentives or not, short sales are likely to be a big factor in the real estate business going forward. That’s because the pool of bank-owned homes is shrinking and many of the people selling today are in distress and trying to get out from under a mountain of mortgage debt.
Short sales were about 12% of all sales in August, versus 18% for bank-owned homes, according to the National Association of Realtors. But that ratio has changed since earlier this year. At their peak in March, bank-owned sales were 31% of the market vs. 18% for short sales. “We’ve gone through the subprime foreclosures,” says Thomas Popik, director of research at survey firm Campbell Communications. “The next wave is short sales by people who lost their jobs.”