For those who don’t know, a short-sale is where the seller of a home owes more than he/she can sell it for, and the bank agrees to settle for less than owed.
As you can imagine, most banks don’t jump at the chance to accept less than you borrowed.
The government is pushing short-sales as an alternative to foreclosures, however, and in fact have created HAFA, the Home Affordable Foreclosure Alternative program.
Under this program, banks are encouraged to offer short-sale approval when their borrowers can’t make payments, are underwater, and due to circumstances, cannot qualify for a modification.
Until recently, most banks have been loathe to accept short payoffs, even if it meant even greater losses at foreclosure.
This is changing, however, as the government, investors, bosses and common sense dictate that they’ve got to do something or they’ll continue having foreclosures, which will cause further reduction in values, and because of it, more of their borrowers will decide that maybe a foreclosure isn’t such a bad idea.
From my experience, there are two banks at opposite ends of the short-sale procedure scale. At one end is Bank of America, by far the most difficult of the large banks to deal with when attempting a short sale. At the other end of the spectrum, Wachovia, which has streamlined procedures and get them done quickly.
More next time….