New short sale transaction rules established as a result of the federal government's Home Affordable Foreclosure Alternatives program, or the HAFA, are designed to streamline the short sale process for those properties with sellers who have mortgages owned or guaranteed by Fannie Mae or Freddie Mac. Though the majority of these new rules only impact the sellers and lenders, many also affect short sale buyers.

If you are one of the many who have their eye on a short sale property, now is the time to review the short sale rules below and consider how they might affect you, the buyer.

Rule 1: Lenders must approve or deny the offer for the home within 10 business days of receiving the offer.

If you are at all familiar with short sales, you know that buying a short sale property is quite a lengthy process. Many buyers are forced to wait several months just to hear back on whether or not their offer was approved. With these new rules in effect, buyers will no longer be forced to suffer through long waiting periods. Lenders now have strict time lines for when the short sale offer needs to either be approved or denied. This is done to not only speed up the short sale negotiation period, but also standardize the way mortgage professionals handle short sale transactions.

Rule 2: Buyers must present documentation of funds or a pre-approval letter from a lender with their offer for a short sale.

When you're ready to buy, you need to prove you have the financial backing to get the job done. Pre-approval is crucial. Work closely with your Next Generation Lending mortgage professional to ensure the documentation you need is ready to go so you don't miss out on a short sale opportunity. Once you've handed the necessary documentation over to the seller, the short sale seller has three days to present it to their lender for review.

Rule 3: Settlement must take place within a reasonable period of time after the offer is made.

This rule also aids in expediting the typically sluggish short sale process. As a caveat to this new rule, the lender cannot require a closing earlier than 45 days from the date of the sales contract unless the home seller agrees.

Next Generation Lending is there to make the mortgage process quick, cost effective and efficient. Keep in close contact with your Next Generation Lending mortgage professional by calling 952-215-3203. This will ensure you receive feedback on your short sale offer as soon as possible.

Rule 4: Buyers cannot sell the property again for 90 days.

The HAFA program is not set up to accommodate those real estate investors looking to “flip” properties in order to make a quick buck. This 90 day rule was put in place to prevent sellers from purchasing the property at a low price and selling quickly at an inflated price.

Rule 5: Short sales transactions through the HAFA must take place at “arm's length.”

Thinking about taking that short sale property off of your sister's hands? Well think again. A short sale transaction must be done at “arm's length,” requiring the seller to sell their property to an individual they do not know. This means selling to friends, family or anyone they might have a personal or business relationship with is out of the question.

As the housing market heals, expect to see more shorts sales for sale; especially since homeowners, lenders and government officials are determined to avoid foreclosures at all costs. But keep in mind, not all short sale properties will be governed by the HAFA program's short sale rules. Those sellers with loans owned by lenders other than Fannie Mae and Freddie Mac will need to negotiate their short sale terms on an individual basis.

Call your Next Generation Lending mortgage specialist at 952-215-3203 to learn more about the HAFA program, or to be pre-approved prior to shopping for short sale deals.

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