US Treasury to Introduce Streamlined Short Sale Process

Dear Sue

I have been in escrow on a short sale property for over a month. My agent has not heard from the lender so I don’t know if the sale will be approved or not.

My agent said that I should be patient. She said that my patience would be rewarded because the property is such a good deal.

The problem is, I can’t wait because I am doing a 1031 Tax Deferred Exchange and I must identify the property that I am exchanging into by October 2.

If I don’t get the property I will have to pay taxes on the money I made on my sale.

Should I stay in escrow and take my chances or should I move on to another property?

Nervous Ned

Dear Ned

You are wise to be concerned. Getting short sale acceptance from certain lenders is sketchy at best. While some short sales are approved within a two to three week time period, some take three months or more. Some are not approved at all.

I would suggest that you keep your current escrow in place and locate and identify at least two other properties that would work for you. The “Three Property” Rule, under Internal Revenue Service guidelines, allows you to name three properties within 45 days from the closing of the escrow of the property you are exchanging out of.

The three properties must be identified within the 45-day time period but you have six months to close the escrow on one of the three properties that you identified. You can buy more than one property as long as the total amount is at or more than the relinquished property. It is very important that you verify the time frames with your exchange consultant and/or tax professional.

Good luck with your exchange!

Dear Sue

I am burning with envy! Here I am sitting in a house that I am upside in down while my friends are out buying homes that are “killer deals”.

Homes in my neighborhood are being purchased for 40% less than I bought mine for. Is there any way I can get out from under my house and just start over?

Frustrated Frank

Dear Frank,

The administration is expected to introduce a foreclosure alternative program by months end. It will provide incentives for, and encourage servicer’s and borrowers to pursue short sales and deeds in lieu of foreclosure, in cases where the borrower does not qualify for other programs.

The program will simplify the process of pursuing short sales and deeds in lieu. The program will standardize the process, documentation and short performance time frames.

According to David Stevens, FHA Commissioner, “These options eliminate the need for potentially lengthy and expensive foreclosure proceedings, preserve the physical condition and value of the property by reducing the time a property is vacant and allows the homeowners to transition with dignity into more affordable housing.”

No matter how you cut it, this is good news! A prudent “under-water” homeowner would wait for the details of this plan. It could be a matter of good home dollars and sense!