Tip 19-2011: Short Sales and HAFA

(Short Sales and HAFA)  In April, 2010, President Obama proposed his plan to provide uniformity and to shorten the short sale process.  This plan was called “Home Affordable Foreclosure Alternatives” (HAFA), and was proposed as an alternative for a failed HAMP (Home Affordable Modification Program).  Just as HAMP is a big failure, so has HAFA, until recently.

Several lenders have recently indicated that occasionally a short sale seller may qualify for a HAFA short sale.  Even though there have been very few successful HAFA closings, it definitely is a strategy to buy more time for a Seller to obtain a short sale contract.  Under HAFA, the lender will pre-approve a sales price for the house, will provide sufficient time to obtain a contract, will pay a full 6% real estate commission, will pay the Seller a relocation allocation, and will agree to no deficiency.

Even if the lender does not allow the streamlined HAFA short sale, they will usually allow a conventional short sale.  Hopefully, as more lenders realize that short sales are going to be with us for the foreseeable future, they may embrace HAFA or at the very least streamline some of their short-sale procedures.  Only time will tell!

Please contact our firm if you have questions or need legal advice.

Senior Partner

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBLaw.com
www.TGBLaw.com

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Tip 18-2011: Short Sales - Closing Deadlines

(Short Sales – Closing Deadlines)  The perfect “Short Sale Buyer” needs patience and cannot usually be in a hurry to close.  This unfortunately is not always the case, especially after short sale lender approval.  Once the short sale lender has approved the short sale, the short sale lender will normally only allow thirty (30) days for the closing to occur.

In other words, we all hurry and then wait for lender approval, and then when it finally comes there is a short period of time to close.  When they finally approve the short sale, they want the Buyer to close within their approved time line.  The short sale lender rarely pays any attention to the closing date in the contract.  Once you have short sale lender approval, it can be a mistake to ask for an extension of the closing date. 

Extensions, however, can be arranged, but there is always a risk.  The seller’s financial documents may need to be updated or the lender may need to order a new BPO before they will extend the short sale approval.  Even if an extension is granted, it usually includes extra costs (Ex: a per diem interest penalty.)

The best practice is not to take the risk of requesting an extension of the short sale approval.  The Buyer needs to be prepared to close with their inspection, loan application and loan commitment already obtained.  Then the Buyer is just waiting for the short sale approval.

Please contact our firm if you have questions or need legal advice.

Senior Partner

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBLaw.com
www.TGBLaw.com

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