The GSE mortgage companies, Fannie Mae and Freddie Mac, have developed a new short sale program in accordance with Federal Housing Finance Agency (FHFA) policies for U.S. real estate transactions. The revised policies are aimed at avoiding future U.S. foreclosures. These guidelines will come into effect on November 1, 2012 and this may come as a welcome policy initiative for buyers and sellers alike.
In real estate, short sales (also be known as pre-foreclosure sales) are basically deals to sell property for less than the balance owing on the mortgage. The new guidelines will make is easier for homeowners to qualify for short sales approval and avoid foreclosure or bankruptcy alternatives. For U.S. real estate investors, the new short sales program should facilitate faster transactions and better deals.
The idea behind a short sales is fundamentally to make the best of an otherwise untenable situation. The process incorporates a faster streamlined qualification procedures for homeowners and will help the U.S. real estate market values through decreased foreclosure rates. U.S. real estate investors will benefit from being able to quickly find deals and retain the most property market value – albeit, most likely in a depleted market.
For Canadian investors, the short sales program should provide more readily available deals with motivated sellers. While U.S. foreclosures are generally ‘good deals’, the stigma of a foreclosed property may have a negative impact on property value. The short sale process avoids the foreclosure depreciation while still having the luster of a great deal for the actual value.
As the renter rates and renter demand are on the up-swing, U.S. real estate investors may benefit short sales to set up renting units. Short sales programs allow the seller to be approved more readily and may also provide moving expenses for the seller upon completion of the deal. While the housing situation in the U.S. real estate market remain below average, these types of policy developments will enable more long-term economic growth.
To read more:
FHFA policy description: http://www.fhfa.gov/webfiles/24211/ShortSalesPRFactFinal.pdf
Fannie Mae Guidelines: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2012/svc1219.pdf
Freddie Mac Guidelines: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1216.pdf