New Short Sale Rules Will Help Livermore Valley’s Real Estate Market

If you are a Livermore Valley homeowner struggling with negative equity and a personal hardship, there’s good news: short sales are about to get easier. Effective November 1, 2012, short sale rules are changing for mortgages backed by Freddie Mac and Fannie Mae. These government-sponsored entities are involved in over half of all active residential mortgages in the United States.

The new rules create a cohesive short sale process between Freddie and Fannie and their respective mortgage servicers. The upshot is a reduction in red tape and a wider door of opportunity for struggling homeowners.

For example, homeowners who are current on their mortgage payments could be eligible for a short sale, as long as they have a personal hardship along one of these areas:

  • Divorce
  • Business failure
  • Excessive obligations
  • Death of borrower or co-borrower
  • Job loss
  • New job/relocation more than 50 miles away

In cases where the homeowner is already behind on the mortgage and experiencing a hardship, the short sale will be treated with priority. Also, the paperwork process will be reduced for these homeowners.

It gets even better from there. Mortgage servicers will be given the authority to approve all qualifying short sales directly. No more delays while waiting for Freddie or Fannie approval.

There is also incentive for second mortgages to cooperate with the short sale. Usually, second lien holders refuse to sign off on a short sale because there’s nothing in it for them. The new short sale rules provide up to $6,000 in compensation to a second lien holder. While this may not seem like much, the take-it-or-leave-it deal gives all second liens the same treatment; no more bickering back and forth, and no wasted time.

The only unpopular rule could be the contribution requirement. Homeowners who have sufficient financial assets will be required to chip in on the short sale. In return, they will be off the hook for the difference between the sale proceeds and the mortgage balance.  This is a reasonable compromise that replaces the Mortgage Debt Relief Act of 2007 which expires at the end of this year.

The new short sale rules help Livermore Valley real estate on several fronts. First of all, short sales involve the fair market value of the home, whereas foreclosures are discounted. Short sales also keep the homeowner engaged in the process, preventing home abandonment and neighborhood blight. Last but not least, our home inventory should improve as more short sales come to market. Because they are listed at fair market value and our absorption rate is strong, the new listings would be welcome.

My experience in Livermore Valley real estate will help you whenever you are buying or selling a home! Whether you need the latest market data for Livermore, Pleasanton and Dublin  or you just have a few questions, contact me! I will provide you with reliable, professional guidance throughout all of our market conditions.

John Kurtzer
Your Livermore Real Estate Expert
RE/MAX Accord

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