Impact of New Short Sale Rules on Sellers and Buyers

"Here’s some good news for homeowners fed up with the home short sale process: new rules are expected to make it faster, easier, and more efficient for both buyers and sellers. The Home Affordable Foreclosure Alternatives (HAFA) program, a follow-up to the Home Affordable Modification Program (HAMP), aims to help homeowners by simplifying home short sale procedures and encouraging more banks to participate. Read on to learn more about the HAFA home short sale and how it can help you.What’s New?HAFA is offered to borrowers who have previously applied to HAMP, but either did not meet the requirements or failed to benefit from it. The Home Affordable Foreclosure Alternative (HAFA) program put into effect a new short sale rule in which borrowers must be approved for short sales before putting their home on the market. This greatly lowers the pressure in most banks, as they often have to deal with borrowers who would be better off with a loan modification. The reduced pressure allows them to cater more effectively to those who do qualify for the home short sale process.Documentation RequirementsBorrowers are now required to present all their documents to the bank upon application. Earlier HAFA rules allowed them to get the home short sale process started while still gathering their documents. But many were unable to complete them and ended up going to foreclosure instead. New HAFA regulations avoid this problem by having sellers provide all the paperwork up front, so the home short sale process can proceed more smoothly.Preset Time FramesUnder HAFA, lenders must write a home short sale offer to borrowers who fail or are found ineligible for loan modification within 30 days. The borrower must then reply within 14 days. Offers must be forwarded to lenders within three days, and lenders must either approve or reject them within ten days. This ensures that none of the parties causes unnecessary delays, and forces banks to pursue the home short sale process instead of going straight to foreclosure.Pre-Approved SalesAnother thing that makes the HAFA home short sale different is that banks and borrowers now have to agree on the price before the home is listed. Previously, the home short sale process allowed sellers and their agents to set their price without informing the lender. But since banks have the last word on home short sale pricing, it often took a lot of negotiation between banks and buyers. By approving the price before a home hits the market, the time between offer and closing is much shorter."