A bill recently introduced to the House of Representatives would expedite the flushing of distressed properties out of the housing market by forcing lenders to respond to short sale offers within 45 days.
The Prompt Decision for Qualification of Short Sale Act of 2010 -- H.R. 6133 -- would answer the concerns of frustrated real estate agents who say it often takes upwards of three months to receive a response from lending institutions, if a response comes at all.
Co-sponsored by representatives Robert Andrews (D- NJ) and Tom Rooney (R-FL), H.R. 6133 is currently under consideration in the House Financial Services Committee.
The National Association of Realtors has come out in support of the bill.
"It sounds pro-consumer on its face, but it's probably going to just force a lot of no answers," said Mark Riedy, executive director of the Burnham-Moores Center for Real Estate at the University of San Diego.
Acknowledging that the short sale process is painfully slow at the moment, Riedy said it takes time for banks to decide if there's a reasonable probability that they'll minimize financial loss by accepting a short sale. If banks are forced to make a decision before they can be sure that they're saving money, the decision will be to reject the short sale, he said.
Because of the bloated number of distressed homes in the housing market, banks aren't staffed to handle the volume of short sales they're currently facing.
"In normal times, the bill won't be important because banks won't have any problem getting everything done in 45 days," he said.
Dawn Lewis, owner and agent at New Dawn Realty in Chula Vista, said the proposal is appealing, but she questions whether it will have its desired effect.
"I would love to see it quick, but I'd also love to see it approved," she said, likewise concerned that the bill would result in more declined offers.
Jorge Garcia of McMillin Realty, who recently co-authored the book "Should I Short Sale My House?," thinks the bill would be ultimately inconsequential because banks have already started to significantly improve the decision timeline.
"If you have all proper documentation in the short sale package up front, it makes their job much easier," he said. "It only takes a matter of minutes for them to look at the offer and say yes or no."
Recently, Garcia said he's completed short sales in as little as three weeks.
Both Garcia and Lewis said an Internet application called "Equator Financial Solutions" being used by Bank of America (NYSE: BAC) has made the short sale process considerably easier.
The program is a portal that allows agents to upload all necessary documents in the short sale package, where the agents, lenders and homeowners can easily review them.
"Some of the big banks that are leading the way on the technological end, other banks will see that that's the way to go. It's easier for everybody," Garcia said.
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