Property listings may take nearly a year to close
Realtors and property owners alike are finding that it is near impossible to close a short sale.
The rules favor the lender. Since they are not technically on the contract. They are immune to any contractual guidelines. The home owner negotiates the contract and hopes the lender will go along with it. Having lender approval means absolutely nothing. The lender may or may not decide to close the property.
Following are Bank of America guidelines regarding their response to an offer by a qualified buyer.
Fact #1: Your acceptance of the counter offer terms does not mean the transaction is approved
Acceptance of the counter offer means that Bank of America will take the next step of presenting the transaction for approval to the investor. In some short sales, multiple approvals may be necessary from others including the second lien holder, mortgage insurer and Bank of America senior management.
Fact #2: The terms of the accepted counter offer may be approved, declined or changed
Any of the parties reviewing the transaction can change the terms of the transaction, approve or decline it.
I have had a mortgage company call to say they accepted a client’s offer over a year after the offer as presented. The mortgage company actually was upset my client turned down the offer. Another time my client offered more money than the home was appraised for by the mortgage company. The mortgage company would not even look at their offer saying they were looking at a previously submitted offer. The other offer had been submitted 3 months prior and was $20,000 under my clients offer.
This short sale nightmare has seen the emergence of short sales specialty companies. Their stated goals are to help buyers and sellers bring the transaction to a close. In reality many of these companies charge a fee which can be up to 5% of the sales price. They charge the buyer this fee, without telling them in advance. Inserting it in the middle of the contract in number 4 type font.
Short sales are on the rise. Date — Short sales
June 30, 2008 — 9,402
Sept. 30, 2009 — 13,015
Dec. 31, 2008 — 15,588
March 31, 2009 — 17,471
June 30, 2009 — 23,102
Source: OCC and OTC Mortgage Metrics Report, second quarter
The definition of a short sale
A short sale occurs when a homeowner owes more on their property than the property is actually worth, but their lender agrees to accept less than what is owed as “payment in full”, in effort to avoid the foreclosure process. In other words, if the seller meets the lender’s criteria, the lender agrees to write-off the portion of a mortgage that is higher than the value of a home.
What qualifies a homeowner for a Short Sale?
Behind on payments
Legitimate hardship
Little to no equity
In an ideal world here is how a short sale should work
An agreement is reached between the property owner and a prospective purchaser. The lender is provided with a copy of the offer, along with a copy of the listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections.
Now if everything goes well, the lender will approve your short sale. As part of the negotiation, the owner may ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.