Banks are ramping up short sales thanks to government incentives and the realization that short sales result in lower losses than foreclosures. On average, banks lose 50 percent on a foreclosure, but only 30 percent on a short sale.
Bank of America, the nation’s largest mortgage servicer, has dramatically reduced the time it takes to process short sales. Elizabeth Weintraub, a Sacramento, Calif.-based real estate practitioner who handles many short sales, said, “Bank of America approved [a short sale] in 24 days. That flipped me out.”
The hang-up for many short sellers has been second liens, but the new government program gives first lien holders incentives to share and offers second lien holders and investors a $6,000 cash incentive.
Under the new program lenders must tell the seller the minimum they’ll accept. When the seller comes back with a good offer, it must be accepted within 10 days.
Chris Saitta, CEO of Equator, which produces short-sale software, predicts a boom in short sales. “The challenge will be handling all the volume,” he said.
Source: CNNMoney, Les Christie (03/29/2010)