US Government To Provide Short Sales Incentives

I have completed a lot of short sales of Daytona Beach homes and condos over the past two years. I expect more sellers will be taking advantage of short sales with the latest government plan to provide payouts for short sales.

Who Will Get Short Sale Money?

According to Travis Hamel Olson, COO of the Loan Relief Corporation, both the primary and secondary lender and the seller of the distressed property will receive payments.

The New Short Sale Process

The primary lender will get up to $1,000, the second mortgage holder will get $3,000 and the seller with get up to a $1,500 relocation allocation.

To qualify for this program, the homeowner needs to apply for the Home Affordable Modification Program (HAMP) to attempt to modify their loan. Once the homeowner is rejected, they are eligible for the government short sale program.

Who Benefits?

The push for the program is coming from the current Administration, the Treasury Department and Fannie Mae and Freddie Mac. They believe that it is less expensive to do a short sale rather than a foreclosure. It’s probably a more politically palatable that more and more foreclosures.

From the perspective of buyers and sellers, the seller benefits from getting out from under the loan without the more negative impact of a foreclosure on their credit scores. However a short sale does affect your credit score. The buyer can benefit from a home that sells well under the average market value. In other words, buyers can get a bargain, but it’s not guaranteed. Buyers need to be careful that the final price that’s settled upon includes all costs and that they are purchasing a property that is truly below market value. They should also have an attorney review the bank offer if there is any uncertainty at all.

Will It Work?

It could. The HAMP program has been a general failure. Of over 1,000,000 invitations from lenders to modify mortgages under the program, only 31,382 mortgage modifications have been made permanent. This new program seems to mesh with what a lot of lenders are doing, but when the government gets involved, there are no certainties.

I hope it works. If you have any questions on Daytona Beach short sales, feel free to contact me.