Is This the End for Short Sales?
Flipping short sale properties has already been steadily becoming more difficult with banks attempting to eliminate what they call ‘short sale fraud’ and adding tons of new documents and affidavits to closing packages. However, real estate investors using transactional funding for fast flips of these steals have even more reason to question how long they will still be around.
Mortgage giant Fannie Mae has reportedly been sabotaging short sale deals in progress by offering sellers thousands of dollars to execute a deed-in-lieu of foreclosure instead. Many hungry for the cash are obviously jumping on the opportunity.
Recent reports by lenders also show an incredibly low level of interest in short sales from those whom they have been offering up to $20,000 to do them.
On top of this new government and bank plans to stem foreclosures through further relaxing of refinancing requirements, turning properties into rentals and auctioning off bulk REOs could further deflate the motivation to entertain short sale requests from borrowers.
So is this the end to the free ride on short sales? Not likely. The tax break to offset deficiencies in payoffs is set to expire next year but this could well be extended. Plus, short sales have been around a lot longer than most people think. Lenders have often used short sales to unload unwanted loans and homes, even during the recent boom years.
So short sales will still be possible but it is wise for real estate investors, especially those who are flipping houses to diversify their sources of distressed properties now in order to maintain volume and cash flow. Try looking further back on the chain and figure out how to catch pre-foreclosures before they even happen.
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