Austin Property Talk

Good News on the Foreclosure Front

This past Friday, HUD secretary Shaun Donovan announced a temporary lift on the FHA mortgage seasoning requirement.  This change will allow for quicker resale of many properties in short sale or foreclosure. 

Since that probably didn't make any sense to you, lets try that again in English.  Up until Friday, when this announcement was made, if the current owner of a property did not own that property  for a minimum of 90 days, it could not be sold to a buyer who planned on using FHA financing.  FHA financing is a government insured loan program that has become the program of choice for many home buyers these days due to its qualifying criteria and lower down payment requirements.  

The original primary reason for the "seasoning" requirement was valid.  HUD wanted to ensure that prospective house flippers were not purchasing properties under the premise of owner occupancy, using the lower down payment requirement, rehabbing the houses, and turning around and selling them quickly for a profit.  That part of it made sense.  However, a secondary effect was that many short sale or foreclosed properties that were held or purchased by an intermediary were no longer eligible for the FHA financing until they became "seasoned".  Thus, many would-be buyers were turned away as a result.

This temporary change will have a broader effect on areas outside of Austin and Texas that have been hard hit by foreclosure activity, but it hit very close to home last week.  

I am currently working with a first time buyer couple who's only option at this point is FHA financing.  Fortunately, we received news last we that we'd "won" out in a multiple offer situation on a great short sale deal, only to find out that it came with a stipulation:  No FHA financing.  It turns out that the loss mitigation company (short sale negotiation company) currently has an option to purchase the property and turn right around and sell it almost simultaneously.  This is a huge benefit to the seller because he almost assuredly avoids foreclosure, but we found ourselves in a situation where the "seasoning" requirement was not going to be met.  Talk about frustrating!

Then low and behold, the real estate Gods looked favorably upon us and this announcement was made on the very day that we had to make some sort of decision.

I know all of this might be a little confusing, but trust that this is going to benefit the Austin Real Estate market as a whole. Though our foreclosure numbers are lower than some, the quicker they sell, the quicker resale prices will come back in some areas.  

From the Good News Department

From the Good News Department . . . .

Anyone who has been involved in a short sale knows how frustrating and stressful the entire situation can be on all involved.  Obviously the most stress falls on the shoulders of the seller.  But, the frustration part usually falls in the buyer's lap.   Reason being, to date short sales can take anywhere from six weeks to six months for lender approval. 

A lot depends on what stage the proposed "short sale" sale is in.  For instance, if a responsible homeowner has been in consistent contact with the lender and a short sale package has been completed, the house may be an "approved" short sale and has a better chance of closing sooner.  On the flip side, and where most short sales wallow, is the "short sale - subject to lender approval" category.  

Depending on the lender, these unapproved short sales can last months and months.  Oftentimes they end up falling out of contract for a couple different reasons.  Either the homeowner or Realtor assisting has little to no idea about what "net number" the lender will be willing to accept and so the property is marketed well below the realistic sales price.  Or, the approval process takes so long that prospective buyers who may have a deadline decide to withdraw their offer and look elsewhere. 

Want to know exactly what a Short Sale is? 

You are waiting for the good news, right?  The government recently announced improved short sale guidelines.   Here is the Information on the New Short Sale Guidelines taken directly from the press release through the National Association of Realtors. 

This is encouraging news and should help a number of families avoid foreclosure which is the biggest detriment to future credit implications.