As you may know, an investigator at Fannie Mae wrote an article in its newsletter last week casting aspersions at the practice of transactional Short Sales. Agents and others are likely to begin asking whether Short Sale flips must now be avoided.
The fact is, the article came from one individual within a very large organization who may never have even read the agency’s official position on Short Sale flips, which is a favorable position. This directive, “Attachment A: Best Practices for Loans Involving Possible Property Flips” (October 9, 2009) is still the ruling that counts with the thousands of underwriters and brokers that make Fannie Mae loans. The Short Sale transactions must:
1. Be an arms’ length transaction with no close relations involved and no collusion between the parties.
2. Must have proper comps in the neighborhood that validate the price.
3. Must be a genuine distress sale property.
4. Must have that distressed situation cured by the transactional Buyer to justify quick resale at a significantly higher price.
5. Must be a separate transaction with its own funding. Funds from the two transactions cannot be mixed and each owner must have a separate title record.
6. All aspects of the transaction and funding must be disclosed.
7. A standard, independently assigned appraisal must be issued.
Let your Agents who inquire about the recent Fannie Mae article know that you are following the letter of the directive on transactional Short Sales put out by Fannie Mae last fall and that unless these guidelines are altered drastically you are fully compliant with these rules. Many other similar instructions have come out from title companies, lenders and even the FHA which validate using this methodology.
Transactional Short Sales are an important part of the mix of methods to get the housing market moving again. Government and quasi-government housing agencies, and most major Lenders and underwriters recognize that fact. It is an efficient and effective way to get Short Sales started and approved as quickly as possible. They perform a service by getting the property into productive use again, the Homeowner out of a bad situation and the Lender paid more and sooner than with an REO.
Life isn’t about waiting for the storm to pass…
It’s about learning to dance in the rain.
The most difficult thing is the decision to act, the rest is merely tenacity. The fears are paper tigers. You can do anything you decide to do. You can act to change and control your life; and the procedure, the process is its own reward. - Amelia Earhart
"The greatest mistake you can make in life is to continually be afraid you will make one." - Elbert Hubbard