Clark Behind The Headlines
From HLN's Money Expert Clark Howard
I have an important tip for you if you have been considering buying a home and you’re looking for a real deal.
In the past, I’ve made fun of short sales. A short sale is where instead of you being foreclosed on as a homeowner, you work with your lender to actively market your home, and then in turn, sell it for less than the mortgage balance.
The buyer gets a home that hasn’t gone to seed like foreclosures do. They get a house at a great price, and you get out without destroying your finances with a foreclosure.
A short sale will pinch your credit, but it will not hurt you to the degree that a foreclosure will.
Well, the problem has been, many banks have failed to behave themselves in processing requests to sell houses as short sales. Lenders had set up their own voluntary guidelines that people would have answers in 45 days.
Real estate agents can tell you that hadn’t been happening. But now, new federal rules give lenders ten days to respond to purchase offers. Ten days in the banking world is 14 because Saturdays and Sundays don’t count.
Not all loans are covered by the ten-day rule – loans guaranteed by Fannie Mae and Freddie Mac will fall under a different set of guidelines. But for the rest, getting an answer in two weeks is better than 45 days, if ever.
I saw statistics that show in parts of Florida, 20% of the houses sold and closed were short sales and more than 40% were foreclosures. Now my guess is that under the new rules, those ratios will flip. When a bank does the ten-day rule, they will get a kickback from the taxpayers and federal government. Do you know that this could end up saving the taxpayers money?
Once a house goes into foreclosure, the cost to the taxpayers is much higher because of how houses deteriorate once they’re empty. With a short sale, we’re still in a window where the mortgage rates are really good, and you may qualify for the home buyer credit of $6,500 or $8,000.
In late spring, the feds are going to try to unwind the subsidies of the mortgage market. If they’re able to do that, mortgage rates would likely rise. So that’s why right now is a really good window for a home buyer.