Pursuing a short sale may cost you $8,000
With the April 30 deadline for the homebuyer tax credit approaching, gambling that a lender will close the deal in time is risky.
You are probably already too late to snag a deal on a short sale.
Rachel Nacion-Ograyensek and her husband, who found a short sale house they want to buy near Orlando, are gambling that they can get the lender to agree to the sale by April 30 and close by June 30, to meet the tax credit deadlines.
"The house is our dream house -- it's perfect for us," Nacion-Ograyensek told The Orlando Sentinel. "We are trying to get in on the tax credit, but it's done in April, and it's already February. We've gotten to the point where we're passively looking for other houses, but none are quite right."
With just 67 days until the deadline to have a signed contract on a house, falling in love with a short sale home may mean you have to decide between the tax credit and the home.
"That's where you get into that riverboat-gambling mentality," Jim Ruddy, Nacion-Ograyensek’s real estate agent, told The Sentinel. "Is it worth gambling that $8,000?"
In depressed markets, such as Florida and California, short sales make up a significant percentage of the houses on the market. In Orlando in December, 67% of home sales were distress sales -- and about half of those were short sales, The Sentinel reported.
New Treasury Department rules that are supposed to streamline short sales take effect April 5, but those rules first require the borrower to seek a mortgage modification, so it’s unlikely they will be much help to buyers seeking to meet the tax credit deadline. The rules require lenders, who now can take months to respond to a purchase offer, to respond within 10 days.
He cited a February 2009 survey of 1,300 real estate agents that found that only 23% of short sale offers actually resulted in a sale. More than 90% of agents blamed a slow response from lenders for the failure of the deals.
Though some short sales in which only one lender is involved may close in a reasonable amount of time, there is no way for the buyer to know in advance how long a deal will take, Cook noted. In cases where there are liens from homeowner associations, second lenders and mortgage insurers, the sales take even longer. “Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing,” he wrote.
If you think you want a short sale house and are on a tight deadline, Lynne Byrne at Daytona Real Estate recommends making offers on five or six properties to increase your odds that one sale will be approved in time. She also recommends using an agent who is an expert in short sales and scheduling the closing well in advance of June 30 to deal with any problems that arise.
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