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How a short sale listing can become like a quicksand trap

When real estate professionals take on a short sale listing without understanding the constantly changing rules and incentives programs, it can feel much like quicksand as it becomes overwhelming and difficult to navigate.

Have you ever stepped in quicksand? While I’ve never been near quicksand, I’ve certainly seen my fair share of it in cartoons and movies throughout the years. Those depictions make it seem like once you are in, it’s nearly impossible to get out. Taking a short sale listing without being aware to all of the different aspects of the short sale process may be a bit like drowning in quicksand.

Understanding the HAFA Program

In the last week or so, I’ve met up with two different agents that felt that they were drowning in quicksand—because they didn’t have all the correct information about the Treasury’s short sale incentive program, HAFA (Home Affordable Foreclosure Alternatives).

Let me tell you a little bit about this program. First off, any short sale seller can investigate whether they can sell their home through the HAFA program. However, just because the short sale seller learns that his first lien holder participates in the program does not mean that the seller’s loan is eligible for the program. There’s a difference there; a tiny one, but an important one just the same.

What are the benefits of HAFA? (Read the entire Treasury HAFA Bulletin.)

  • Short sale sellers who participate will receive $3000 in relocation assistance at closing.
  • A HAFA short sale releases the seller from any future liability on the mortgage note(s). (Depending upon the state where the property is located, this may be more or less important.)
  • There is the opportunity to obtain a pre-approved price for the short sale of your home.

Eligibility Requirements*

  • Seller lives in the home or vacated in the last 12 months.
  • Seller has a documented financial hardship.
  • Seller has not purchased a new home within the last 12 months.
  • First mortgage amount is less than $729,750.
  • Loan was obtained prior to 1/1/09.

*Note that the eligibility list is for guidance only. Certain loans are not eligible, despite the fact that the servicer participates in the program.

What If the Seller Has a Second Mortgage?

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If the seller has a second mortgage, the second lien holder must agree to accept what is being offered by the first lien holder (currently no more than $6000, but soon to be changing). The second lien holder also must agree to waive the right to pursue deficiency. If the second lien holder will not release the lien under these terms, then the short sale seller may still participate in a short sale BUT will be ineligible for the HAFA program.

And, that, my friends is the quicksand, which has been stepped in by many short sale agents. If the seller wants to participate in HAFA, but the second lien holder will not agree to the terms, then the entire short sale is not eligible for HAFA. No ifs, ands or buts. Time to figure out a way to pull yourself out of that muddy mess, and get that short sale moving along towards a successful closing.


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Written By

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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