First-time home buyers have been eligible for tax credits of up to $8,000 since last January as part of this year’s economic stimulus package.  The newly backed program will expand the credit to include existing homeowners.

Under the revised program, those who have owned a home for at least five years will be able to apply for tax credits of up to $6,500 when they purchase their next home.  To qualify, buyers will have to sign a purchase agreement by April 30, 2010 and close by June 30.

The maximum purchase price on a home will be $800,000 with vacation homes not eligible. Income limitations are $125,000 for single tax payers and $225,000 for joint filers.

By DIANA GOLOBAY 
September 10, 2009 8:09 AM CST

“The mortgage servicing industry in coming weeks will see details of an incentive program aimed to prevent foreclosures by encouraging servicers to pursue short sales and deeds-in-lieu of foreclosure.

US Treasury Department sources confirmed to HousingWire the Treasury expects to issue details on the short sale and deed-in-lieu program later this month.

The program is being finalized and will be announced as soon as possible, according to testimony Wednesday by Federal Housing Administration (FHA) commissioner David Stevens.

He said at a House Financial Services subcommittee hearing that the Making Home Affordable (MHA) Program is on track to provide modifications and refinancings to millions of homeowners, but noted other foreclosure alternatives exist.

“Because we know that the MHA program will not reach every at-risk homeowner or prevent all foreclosures, on May 14th the Administration announced the Foreclosure Alternatives program that will provide incentives for, and encourage, servicers and borrowers to pursue short sales and deeds-in-lieu (DIL) of foreclosure in cases where the borrower is generally eligible for a MHA modification but does not qualify or is unable to complete the process,” he said, according to prepared remarks.

He said the program will simplify the process of pursuing short sales and deeds-in-lieu, which will encourage more servicers and borrowers to participate in the program. The program will standardize the process, documentation and short performance timeframes.

“These options eliminate the need for potentially lengthy and expensive foreclosure proceedings, preserve the physical condition and value of the property by reducing the time a property is vacant, and allows the homeowners to transition with dignity to more affordable housing,” Stevens added.

Distressed sales — including short sales and foreclosures — accounted for nearly one-third of all house re-sales in recent months, leading to the National Association of Realtors to offer a short sales and foreclosure certification program to realtors.

At the same time, tech vendors and mortgage service providers are looking to fill the demand for short sale-related products and services. Equi-Trax Asset Solutions recently launched a new current listing search offering that searches a servicer’s portfolio to determine short sale and modification opportunities.”

Write to Diana Golobay.

Given our overall economic condition that we find ourselves in here in Metro Detroit and given the fact that our property values have dropped so much over the past few years this is something that is desperately needed.

This is one of the most common misconceptions. The reality is that banks do not want to foreclose on your property because the foreclosure process is incredibly costly. Banks receive more on their investment through a short sale than a foreclosure.

The qualifications for a short sale include:

• Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
• Monthly Income Shortfall – “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
• Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

Myth #2 – You Must Be Behind on Your Mortgage to Negotiate a Short Sale

While this may have previously been the case, today lenders are looking for verifiable hardship, monthly cash flow shortfall, or pending shortfall and insolvency.

If you meet these three requirements and believe that you soon may be unable to afford your mortgage, act immediately.  Do not wait until the foreclosure has started and you have even less time left.

Myth #3 – There is Not Enough Time to Negotiate a Short Sale Before My Foreclosure

This is a myth that probably hurts homeowners the most. Many do not realize that foreclosure is a process, and that there is time to make decisions that may result in better outcomes.

The foreclosing party—in most cases a lender—can stall a foreclosure up to the final day of the process. Today, many lenders will stall a foreclosure with as little as a phone call from you explaining that you are trying to sell, and almost all lenders will stall a foreclosure with a legitimate contract. For real estate professionals who understand foreclosures and short sales, there is time available until the foreclosure process is complete.

Myth #4 – Short Sales are Impossible and Never Get Approved

This is a complete falsehood. Are short sales more difficult to execute? Yes. Do you, as a homeowner, need to learn about a new process? Yes. Are they impossible? Absolutely not.

Myth #5 – Banks are Waiting on a Bailout and Not Accepting Short Sales

You may have heard this, but the reality is that banks (and the U.S. government) are trying to do anything they can, within reason, to avoid foreclosing on properties.  Today, more banks are aggressively pursuing short sales and working with agents who understand how to process them.

Myth #6 – Buyers are Not Interested in Short Sale Properties

This is a myth that potential sellers hear all the time. Thankfully, this is just not true. In fact, we are getting calls from buyers who say they only want to look at foreclosure and short sales.

For buyers, short sales and foreclosures have become synonymous with “good deals.”.  Listing with an experienced agent who is educated in the short sale process will provide you with a great chance of quickly seeing a contract on your property.

Now you want to know, what are the advantages of a short sale?  The advantage is that you are probably going to pay less for the house than it is valued at.  This means that you are moving into a home with instant equity.  Often homeowners who find themselves in a short sale situation don’t have the time to wait 85 days because they are unable to make the payment on their home, this means that they are selling the house below market value in order for it to sell quicker.

A big question at the present time is “Are you a first time home-buyer?”  If so, the federal government is offering an $8000 tax credit to all first time home-buyers or anyone who has not owned a house in the last three years.   In order to receive the tax  credit you must close on your home before December 01, 2009.  With a short sale the process can take anywhere from 30 days to 180 days with most taking 60 days.   This is because although the current owners are the sellers they are not going to be paying back their loan to the bank so the bank must approve the offer that you make.   This means that if you are considering a short sale and are a first time home buyer you need to be looking for a home immediately or you are going to risk losing the $8000 the government is offering you.

So what is the down side to a short sale?  I have already mentioned that it takes a lot longer to close but it also gets more complicated than that.   Often the bank takes a while to respond to the offer, this means that you (as the buyer) are waiting for an answer.  Buying a home can be a stressful process so just proceed with caution when purchasing a short sale as a home-buyer.  They are a wonderful investment opportunity for a buyer, you will need to make sure that your Realtor is fully versed in negotiating a short sale.  Not all turn out bad but just be aware that you may be waiting a lot longer than usual before knowing if this house is going to be your future home.

You must find a buyer, that is where we can help!

What is a Short Sale?

A short sale is when the lender(s) agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the home.

What is in it for the Seller?

The ideal scenario would be for the seller to catch up on their payments and stay in their home.  But for an increasing number of homeowners, this is not a realistic possibility.   This is why they look at Short Sales as a way to resolve the problem rather than hide from their lender.

As a seller, there are myths to a short sale, such as you will lose your home (but that will happen anyway with a foreclosure) or that you have to be behind in your payments – both are not true at all.   There are pros as well, such as your credit score will recover faster than with a foreclosure.

What Motivates the Lender?

Why would a lender let you walk away from the home and forgive the shortfall on your loan? To save time and money.  The foreclosure process is a long and very expensive process for the bank.  Once the bank realizes a foreclosure is eminent, a Short Sale may seem like the lesser of 2 evils.  Also, with a short sale the property was never listed as a foreclosure, therefore improves the lenders foreclosure rate not to mention the property continues to be inhabited and maintained so it doesn’t become a blight on the surrounding neighborhood.

Negotiating a short sale is not for the faint of heart.  It can be very time consuming and take months to negotiate from start to finish.  A well put together short sale package along with an experienced Realtor will net the best results with dealing with the lender.