FHA Short Sales
Changes have now been made to the FHA (Federal Housing Administration) short sale requirements. Here are some of the changes that have been made effective immediately:
1. Borrowers (homeowners) cannot list the property with or sell the property to someone they are related to or someone with whom they have a close personal or business relationship. The short sale transaction must be an “arms-length” transaction and if it is not then that may be a violation of federal law.
2. The mortgage must be in default by the closing date for the short sale.
3. Before closing, if there are any liens on the property in addition to the FHA loan, they must be released. Anyone with a lien on the property who is requiring a payment to release the lien has to submit a written statement and agree to release the lien if they are paid the amount requested.
4. There is now a test to validate the short sale hardship: Servicers of loans must use what is called a Deficit Income Test (DIT) which will advise them if the homeowner is qualified and has a sufficient hardship. Homeowners expenses that are not on their credit report will be verified using the IRS Collection Financial Standards. The property must be owner-occupied in order to be eligible for the short sale.
5. There’s also a streamlined option for short sales on your principal home, second home, investment property and for those in the armed forces with Change of Station Orders. Property appraisals must be completed in 10 days followed by file review by the investor or by FHA. Some sellers may be asked to make a payment of some sort at closing to reduce the difference between what the house sells for and what is owed on the home (the deficiency).
6. Some sellers are receiving up to $3000 from the lenders at closing but it’s not guaranteed to all sellers or owner occupants.
Please note that this short sale is like others in that the transaction is required to be at arms length and the parties cannot be related. There can’t be any special concessions or incentives exchanged between any of the parties, agents, sellers, buyers, closers, appraisers, etc.
We’ve closed numerous short sales in the Naples, Bonita, Estero and Marco Island areas. If you’d like to talk to us about how we can assist you with the short sale process, please give us a call at 239.293.0246.
Thanks,
Michael Bryant – Realtor and Anna Bryant Attorney & Realtor
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