John Beckett's Real Estate Blog

A new federal program, Home Affordable Foreclosure Alternatives, encourages banks to accept short sales by offering them financial incentives to do so. It offers sellers incentives, too.

Homeowners win because:

• They won’t get stuck with a deficiency judgment. Under the program, homeowners are released from all obligations.

• They can receive $3,000 in relocation expenses.

• They can’t be charged any fees to participate.

Creditors win, too, because they don’t inherit a vacant home to maintain. As big as the losses in short sales can be, the losses from foreclosure can be even bigger — by some estimates, as much as 60% of what’s owed on the mortgage.

Secondary lenders, who often stand to get nothing in foreclosures, can receive up to $6,000.

You may qualify for the foreclosure-alternatives program if:

• You have tried unsuccessfully to get a mortgage modification through the Home Affordable Modification Program.

• The property is your principal residence.

• You got your first mortgage loan before Jan.1, 2009.

• You are behind on your mortgage or will be in the foreseeable future.

• You owe no more than $729,750.

• Your total monthly mortgage payment is more than 31% of your income before taxes.

The foreclosure-alternatives program is set to expire Dec. 31, 2012. Some critics predict that it will be as disappointing as the loan-modification program, which was launched in March 2009. Out of millions of distressed homeowners, just 170,000 had received permanent modifications as of the end of February, according to the Department of the Treasury and HUD. (Many more modifications are being offered or are in the trial phases.) The median decline in monthly mortgage payment was about $500.

Will the new program be any better?

“It’s half right,” says Mary Tootikian, the author of “Stunned in America: Sub-Crime Mortgage Crisis.” “The intent of it is good.”

She worries, however, that the new program’s application process will allow lenders to find out borrowers’ incomes and assets. “After they go through this fact-finding mission and they find out you have assets to go after, they don’t have to let you do a short sale,” she says.

Arian-Pace, the Florida attorney, is more optimistic. “The frustration of short sales is the timing of it all, getting banks to approve it,” she says. “You often lose the buyer in the process. I’m hoping it’s a step in the right direction. Really, it’s going to come down to how the banks implement it.”

Read entire article at: http://articles.moneycentral.msn.com/Banking/HomeFinancing/short-sales-are-the-new-foreclosure.aspx?page=2

In most cases, certain closing costs are charged to buyer and others to the seller.  State law may dictate the division of some fees, but usually the division of costs follows local custom.  For most charges, it is always possible for an agreement between the parties to change the usual practice. In general, the seller usually pays for the costs of proving clear title, which may involve a survey and a search of the public records, summarized in an abstract of title. The seller usually pays any broker’s commission or state transfer taxes if required, and for any termite inspection. The buyer usually pays the costs of placing a new mortgage (application fee, appraisal, points on the loan), recording the mortgage and deed in the public records, mortgage tax if required, title insurance and home inspector’s fees where used. Again, the division of the charges can be changed by agreement between the parties.  Many mortgage plans set a limit on how many of the buyer’s costs the seller may agree to cover.

Read more at: http://www.askedith.com/questions/buying/who-pays-closing-costs