According to an article in the Wall Street Journal (subscription required), Fannie Mae is testing a program in Phoenix and Orlando, two of the hardest hit markets, whereby Fannie would agree to a minimum price for which it would be willing to sell a home at, rather then wait for it to fall into foreclosure and sit vacant for weeks and months.
Both Phoenix and Orlando have been particularly hard hit by foreclosures. Home prices fell in the Phoenix region 33% last year through October, according to Standard & Poor's/Case-Shiller home-price index, the worst decline in the country. Some 29% of the state's borrowers had negative equity in August, and an additional 6% of borrowers were approaching negative equity, according to a report by First American CoreLogic, a data provider.
Most recent Case-Shiller home value data
While short sales seemed like a great solution for sellers whose homes were worth less than their mortgages, agents often found that the banks would not respond to offers in a timely fashion, so the net effect was that many of the potential buyers felt frustrated and eventually pulled their offers.
From my own experience, I made an offer around last Christmas on a short sale, and the bank didn't get back to me for over a month. So the two offers that were made were both pulled by the time they made a decision, and obviously the housing market has gotten worse since then.
Hopefully if Fannie Mae is clear that it will accept X dollars for a particular house, at least that sets a "reserve" price, just like with an eBay auction. If a bidding war emerges to bump up the price, that's fine. The alternative is homes that say "Short Sale!" but might as well say "Danger: Avoid hassle!"
For more information on short sales and foreclosure help, please visit AOL's real estate channel.
Brett Widness is an editor with AOL's real estate channel. Find homes for sale, foreclosures, home values, home finance and apartments at AOL Real Estate.
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