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HUD nixes dual agency on FHA short sales

FHA short sales are slow going and sometimes complex, with HUD making a substantial change to the process recently.

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FHA short sales are slow. Very slow.

The thing about short sales is that they are slow going. For most people, when you want something, you want it now. And when you write an offer on a home and have to wait four, six, twelve, or even eighteen months to close, your interest begins to wane.

FHA (Federal Housing Administration) short sales have long been exceedingly slow going and frustrating for homebuyers and sellers alike. You may recall that the Department of Housing and Urban Development (HUD) sets the guidelines for processing short sales for sellers with FHA loans. In my experience, the main reason that these short sales have been slower than others is because HUD requires sellers, buyers, and agents to jump through more hoops (complete more milestones) before receiving short sale approval. For some sellers, this may mean applying for and getting declined for a loan modification prior to beginning the short sale process.

Benefits of the FHA Short Sale

On July 9, 2013, HUD released Mortgagee Letter 2013-23, a letter that appeared to contain good news for short sale sellers and their agents. Effective on October 1, 2013, the FHA short sale will be “streamlined” for many distressed borrowers.

The highlights of the Mortgagee Letter include the following positive changes to the FHA short sale process:

  1. Imminent Default – Certain borrowers do not need to be 30 days behind on mortgage payments to begin the FHA short sale process, just as long as they can demonstrate hardship.
  2. Reduced Documentation – There is now something called streamlined PFS (pre-foreclosure sale) for borrowers that meet certain guidelines.
  3. Up to $3,000 Financial Incentive – Owner-occupant borrowers who successfully sell their properties are entitled to a consideration of up to $3,000 (terms and conditions apply).

Read Between the Lines

Mortgagee Letter 2013-23 is 8 pages long. While the above three positive changes appeared to be the highlights, there is one big lowlight (if there is such a thing).  Buried at the top of page 8 is the following sentence:

“No party that is a signatory on the sales contract, including addenda, can serve in more than one capacity. To meet PFS Addendum requirements, brokers and their agents may only represent the buyer or the seller, but not both parties”

This particular phrase has agents in an uproar. Everyone knows that sometimes a single agent representing both sides of a real estate transaction may not be a good thing. But, what about two agents in the same brokerage? HUD is now going to prohibit that form of dual agency.

In addition to agent dissatisfaction, this sentence also dissatisfied the National Association of Realtors® President Gary Thomas.  In a letter to the Assistant Secretary for Housing, Thomas writes that this policy may minimize the opportunity for sale of many homes in certain parts of the United States. That’s because single brokerages with hundreds of agents under one license dominate in certain areas. And, if none of those agents (all under the same broker) are permitted to bring a ready, willing, and able buyer to the property, how will the property get sold?

Thomas also states that he understands that this HUD policy may have been enacted in order to avoid fraud, particularly problems where pocket listings may net HUD a little bit less money. He points out that Fannie Mae has enacted a more reasonable policy that requires that all Fannie Mae short sales be placed on the MLS for a minimum of five days, thus assuring that all properties are on an open market. Thomas urged HUD to reconsider their policy and adopt the Fannie Mae policy instead.

Depending upon where you live and where you sell real estate, the new HUD short sale policy and all of its associated drama may not impact you at all. But, if you are an agent listing and selling short sales, you’ll want to know what your in for—the improvements to the FHA short sale policy on October 1, and the bad news associated with it.

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

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2 Comments

2 Comments

  1. CJ Johhnson

    September 25, 2013 at 11:38 am

    Designated agent would be a better solution whereby the listing agent could not represent the buyer but other agents in the agency could. Many firms practice this even where it is not mandated as a risk management tool. If a firm has multiple agents and offices this rule could also violate our code of ethics which states we are to cooperate with other REALTORS unless it harms our clients. I know we can not violate law but FHA is making a rule not passing a law so we are stuck in the middle of an ethical dilemma once again.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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