Richard Truax

A short sale is a transaction in which the lender(s) agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt. Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses. A short sale can also be the best option for homeowners who are “upside down” on a mortgage because a short sale may not hurt their credit history as much as a foreclosure.

The increasing number of short sales on the market presents challenges for Realtors. In a recent survey of Florida Realtors, short sales and foreclosure were listed as the top legislative and/or regulatory priority.  Many of the issues raised by Realtors however, cannot be legislated or regulated at the state level.

Realtors must educate their elected officials regarding the negative impact the current lack of a standardized short sales process is having on the overall real estate market. Until the real estate market in Florida rebounds, the general economy of Florida will not recover.  Among the ideas to solve the short sale crisis that have been posed by Florida Realtors are:

 Streamline the process/standardize forms;

 Prevent strategic defaults;

 Allow refinancing at current interest rates & allow principle reduction;

 Regulate foreclosure and short sale negotiations;

 Provide incentives such as doc stamp relief, deficiency judgment relief and debt forgiveness for those buying foreclosures.

Up to this point, states have relied on the federal government to tackle issues related to short sales. TheU.S. Treasury Department created the Home Affordable Modification Program (HAMP) and the Home Affordable Foreclosure Alternatives (HAFA) Program. The HAFA program is meant to make a short saleor a deed-in-lieu of foreclosure a viable option to help homeowners avoid foreclosure. Many Realtors do not believe these federal programs are as successful as they should be.  Florida Realtor leaders are in discussions with the U.S. Treasury Department, Fannie Mae, Freddie Macand state legislators regarding solutions to this crisis. Fannie Mae specifically is advocating their “shortsale assistance desk” to Florida Realtors.