The Short Sale Act of 2011 has generated considerable outcry within the banking industry. If passed, banks would be required to reply within 45 days to mortgagors seeking short sale approval. If banks fail to respond within the designated timeframe, the request would be regarded as an accepted offer.

The Short Sale Act of 2011 would go a long way in expediting the short sale process. By allowing homeowners to sell their home for less than is owed, the property wouldn\’t fall into foreclosure and potentially remain vacant for months on end. Instead, buyers would take immediate possession after closing and either move into the house or rent to tenants.

Having multiple foreclosure homes located within a community causes financial harm to everyone within the area. Property values for all real estate decline. There are less funds available for community resources, such as schools, infrastructure, and emergency responder services, because fewer people pay property taxes.

Although banks incur monetary loss when granting short sale approval, it is usually less than repossessing houses through the foreclosure process. Additionally, banks are released from the responsibility of taking care of the property until they locate a buyer.

At the present time, receiving short sale approval is a difficult undertaking. Nearly all mortgage lenders require homeowners have a qualified buyer in place before they will even consider the option. Homeowners must meet stringent guidelines and undergo a financial audit to ensure they do not own assets that could be used to cure mortgage arrears or pay off their mortgage note.

Completing the short sale process can take several months. Due to the lengthy process many buyers cancel purchase contracts because they get tired of waiting for approval.

As a real estate investor, I\’ve purchased a few short sale homes, but have walked away from several deals simply because the process took far too long. I know several investors that experienced the same challenges. Buying short sale homes as investment properties is rarely a great deal because investors lose money each day their proposal sits on a bank loss mitigator\’s desk.

One program many homeowners are turning to for foreclosure help is Making Home Affordable. While this government-sponsored program has helped make the short sale process more expedient there is plenty of room for improvement.

Prior to Making Home Affordable there wasn\’t a standardized protocol. Lenders setup guidelines that often varied greatly from one another. At present, more than 100 banks and credit unions participate in the MHA program and each must adhere to established guidelines.

Homeowners that are in need of foreclosure prevention help may find it helpful to review all available programs by visiting MakingHomeAffordable.gov. Be cautious of websites using the title of Making Home Affordable that use a .com extension. Sadly, there are dozens of scammers attempting to steal homeowners\’ private information or take money to enroll them in foreclosure prevention programs. MHA is free and does not charge money for information or the application process.

Although the Short Sale Act of 2011 promises to expedite the approval process, the proposed legislation includes a big loophole for banks. The rule states the 45 day response does not commence until lenders obtain \”all required information.\”

As one who has gone through the process a few times, the most aggravating aspect was lenders always misplaced documents. The last short sale home I purchased took over six months to close. If the 45 day ruling had been in place, I could have taken possession and began generating income within a few months. Instead, it took close to a year.

A similar bill was presented to Congress in 2010 as H.R. 6133 Prompt Decision for Qualification of Short Sale Act. At present, the revised bill has not yet been reported by the Committee. If the Act passes it could give a much needed boost to the real estate market. Homeowners could avoid foreclosure. Buyers could acquire properties more quickly, and banks could eliminate toxic assets from their inventory.

As it stands, homeowners and investors will have to wait and watch for the Short Sale Act of 2011 to be placed on the docket and passed through legislation. With any luck, verbiage will be changed to favor homeowners instead of lenders.

Author Bio: Simon Volkov is a California real estate investor who writes about current real estate events. Trending topics include Short Sale Act of 2011, Mortgage Standards Reform, mortgage fraud and improper foreclosure. Stay abreast of breaking news by visiting www.SimonVolkov.com.

Category: Advice
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