Short Sale Act of 2011
The Short Sale Act of 2011 is back on the agenda for review by the House Committee on Financial Services. Previously, submitted as H.R. 6133: Prompt Decision for Qualification of Short Sale Act of 2010 this bill was bypassed by Congress last year, but expected to pass legislation later this year.
If passed, the Short Sale Act of 2011 will require mortgage lenders to respond to borrowers request for short sale approval within 45 days of written request. If the banks fail to respond within the time period the application will be considered approved.
Expediting the process would benefit homeowners facing foreclosure and allow them to sell their home to qualified buyers within a matter of weeks instead of months. Quick response times would greatly benefit realtors and real estate investors.
As a real estate investor who has purchased short sale real estate, I can attest the process is cumbersome. I have walked away from numerous deals simply because the bank couldn't decide if they would allow homeowners to sell short.
With investment property it is essential to take quick possession in order to start generating cash flow. When the short sale process extends for months on end, the property costs investors' money before they finalize the purchase. It's never good to start out in the hole because there are few options to recoup losses.
If I have to wait several months to acquire a short sale home it can take up to a year to break even. For this reason, many investors are walking away from distressed properties because it takes too long to turn a profit.
While I and others are hopeful the Short Sale Act of 2011 will expedite the purchase process, I can't help but have reservations. The rule is written in vague language and proposes the 45 day deadline begins when lenders receive all required information.
The last short sale transaction I engaged in was a fiasco. The bank lost documents I mailed via courier service with a tracking number, but claimed they never received them. The loss mitigator I was working with took a week vacation then quit. Weeks passed before being assigned to a new mitigator who was clueless about short selling.
If banks were required to adhere to a standardized protocol it would benefit everyone. Homeowners could avoid foreclosure. Investors and buyers could take quick possession of short sale homes. Banks could liquidate negative assets and eliminate maintenance costs for the property.
If the Short Sale Act passes it could make a positive impact on the real estate market. Of the real estate being sold about 13-percent of sales are short sale properties. Most realtors believe if the short sale process were streamlined this figure could easily double. Considering home sales are at an all-time low, any boost would be welcomed.
Only time will tell if the Short Sale Act of 2011 makes a difference. We'll continue following proposed legislation and invite you to subscribe to our mailing list to receive updates and breaking news. While you're here feel free to browse our real estate article library focused on investing, home buying, foreclosure prevention, and personal finance.
Published on June 02, 2011 at 03:35 AM