Short sales – selling a home for less than it’s worth as a means of avoiding foreclosure – are growing more popular, and becoming easier to complete, according to a report from the San Jose Mercury News. Just a year ago, such a transaction was a lengthy process, because it required bank approval. But now, a government program designed to help those who dropped out of federal loan modification programs is streamlining the process.
[Related: Short Sales, Foreclosures and Your Credit Score]
The Home Affordable Foreclosure Alternatives program mandates that banks respond to an offer for a short sale within 45 days, the report said. It encourages this by giving the institutions financial incentives and providing $3,000 in relocation assistance for the troubled homeowners.
As a result, short sales are becoming increasingly common in areas especially affected by declining home prices, the report said. In April, short sales accounted for 18.6 percent of all existing home sales in California’s Bay Area, up from 17.6 percent the year prior and 12.9 percent in April 2009.
However, short sales can also be problematic for some homeowners because such a transaction can have a severe negative impact on consumers’ credit scores. This is because their mortgage lender may have to forgive at least part of their debt.
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