Fannie Mae to Start Pre-Approving Short Sales

Fannie Mae will start pre-approving short sales in an effort to make them more attractive to buyers.

Fannie Mae has announced that it will start pre-approving short sales, or preforeclosure sales, starting with pilot projects in Phoenix and Orlando. They will begin with mortgages with Countrywide that are Fannie Mae backed, and hopefully expand out from there.

As most buyers and Realtors know, buying a short sale home can be a very lengthy and often frustrating process, since the banks won’t provide any information as to what price and terms they’ll accept from a buyer until they receive an offer. Even then, some banks will take up to 6 months to provide an response to a short sale offer, which may alter the terms of the buyer’s offer to the point where it is no longer an attractive purchase. This new pilot project will provide the listing agent (Realtor) with the price and terms that the bank is willing to accept up front, thereby speeding up the process and eliminating the guessing game as to what price the bank will ultimately accept for a home.

Recent months have shown some improvement in the short sale process, with some banks hiring 3rd party processors and others creating a more well-trained in-house short sale department. Still, the wait time is rarely less than 30-90 days unless a prior buyer was approved and then backed out of the sale. Fortunately some banks have gone to more of a blanket approval where the price and terms are accepted for any buyer, which does make things a lot easier. However, banks like Countrywide continue to issue approvals based on a particular buyer, and replacing that buyer with a different one takes a minimum of 30 days, and quite often close to 60 days to get approved.

Homeowners who are having difficulty keeping up with their mortgage payments should first contact their banks to request loan modifications to reduce the amount of their current payments and defer any missed payments. If a loan modification is denied, then the next step should be to list the home for sale as a short sale.

Short sales (or preforeclosures) keep the homeowner in control of their own destiny and cause less damage to the homeowner’s credit report.  With a short sale, the seller can remain in the home until escrow closes, just as they can in a regular sale. When a home becomes a bank-owed (REO), the sellers must vacate the property within a certain timeframe after the bank takes back ownership, typically within 30 days. Short sales should also be less expensive for the bank to process, since they don’t have to go through the legal process of taking the home back at auction and then remarketing it as a bank-owned (REO) home.

Short sales are not for the faint of heart, so if you are a buyer or seller thinking of entering the short sale market, be sure to find a qualified and experienced Realtor to help you out. If you’re buying or selling in the Santa Clarita area, be sure to call Santa Clarita Realtor Linda Slocum at 661.670.0349.