RE/MAX Executives Forecast that Short Sales Reforms Will Speed Recovery of Chicago Real Estate Market
New national guidelines for short sales recently were issued by the United States Treasury Department, and they are likely to have a meaningful and beneficial impact on the metropolitan Chicago real estate market, according Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network.
Chicago, IL (PRWEB) -- New national guidelines for short sales recently were issued by the United States Treasury Department, and they are likely to have a meaningful and beneficial impact on the metropolitan Chicago real estate market, according Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network.
Jim Merrion, Regional Director, RE/MAX Northern IllinoisShort sales are transactions that occur when a lender accepts the sale of a home at a price less than the actual amount owed on the mortgage. Homeowners eager to avoid foreclosure often try to complete a short sale of their property.
In October, short sales represented 8.3 percent of home sales in the seven-county Chicago metro area. In comparison, foreclosures accounted for 29.7 percent of sales. The delays that have been typical of short sale transactions have made some buyers reluctant to consider homes that would involve that type of transaction, according to Merrion.
"As a result, those offering their homes as short sales have found it takes much longer to secure a buyer and then even longer to actually close the sale," he said. "That has made it harder to get short sale properties off the market and into the hands of a new owner."
During October, for example, the average market time needed to sell a foreclosed home in Chicago was 117 days, while Chicago homes offered as short sales spent 245 days on the market before going under contract.
In DuPage County, foreclosures were on the market an average of 157 days, short sales for 248 days. The comparable figures for Lake County were 124 days for foreclosures and 246 days for short sales. For the past year, RE/MAX executives have been urging the government to take steps to make the short sale process faster and simpler in order to speed recovery of the housing market.
Until now, the short sale process has been cumbersome for all involved. Even after a home went under contract, it could take months for a transaction to close. But, through the Foreclosure Alternatives Program and the new Treasury guidelines, short sale transactions are likely to increase dramatically in number. That will help avoid many foreclosures and result in fewer vacant and vandalized properties in neighborhoods across the country, according to Merrion.
"Short sales are absolutely critical as more and more people continue to face foreclosure and as our housing market struggles to recover," said Dave Liniger, chairman and co-founder of RE/MAX International, who traveled to Washington, D.C., frequently during the last year urging action to facilitate short sales.
"While not all of our recommended changes were implemented, the Treasury's new guidelines go a long way in incentivizing both lenders and homeowners to work together to keep homes from falling into foreclosure," Liniger said. He believes a streamlined short sale process would help many families avoid the trauma of foreclosure and help the housing market remain on the road to recovery.
The new guidelines enhance the short sale process in several ways:
- Speeds up response time - Mortgage servicers have 10 days to say yes or no to a short sale request, and after the transaction is complete, the borrower could be completely released from debt.
- Offers financial incentives – Borrowers are eligible to receive a $1,500 moving allowance if they sell their home through a short sale, and mortgage-servicing companies will in turn receive $1,000 for every completed short sale transaction.
- Limits proceeds to second lien holders – Second mortgage holders can receive no more than $3,000 of the sales proceeds to release their liens, and investors who hold the first mortgages can collect up to $1,000 for allowing such payoffs.
The program also facilitates the transfer of ownership by a borrower through a "deed in lieu of foreclosure," another helpful alternative for homeowners seeking to avoid foreclosure.
As part of its own efforts to help work through the existing glut of distressed properties on the market, RE/MAX recently announced a strategic partnership that will allow its affiliated agents to earn the industry-recognized Five Star Professional (FSP) designation. This training program is designed to help agents work more effectively with lenders and help consumers fully utilize government programs.
"The Five Star Institute offers excellent training that will put our agents in a better position to help their local housing market recover," said Tom Kramig, vice president of multi-media and education for RE/MAX International.
This new initiative by RE/MAX supplements an existing effort that encourages RE/MAX agents to earn the Certified Distressed Property Experts (CDPE) designation. Of all agents in the United States who now hold the CDPE, 58 percent are RE/MAX agents.
"RE/MAX associates are among the most versed in the industry in short sales and foreclosures," said Merrion.