Have you agent file for an extension now, stating this is FHA and you cannot close in 2.5 weeks going FHA. If they grant you the extension then there is no per diem. That should put your mind at ease. That being said, a good lender can close in under a month. We just closed on from beginning to end in under 2 weeks but it was sweating it the whole time, too stressful.
Litton Loan Services was the owner's lender for this short sale. The short sale department handled things terribly!!!! We started by agreeing on a net amount to the bank and they demanded a 2 week closing. They wouldn't agree to a later closing. So they raised the net amount by 2 grand. Then we gave them that and they again would not agree to a realistic closing date. So we played this game until they raised it by 5 grand. This was April 29th (day before tax credit ended). Then we finally gave in and gave them the money and they came back asking for 8 grand more. We walked away, all parties lost because the bank was too greedy and tried to call our bluff. Now the bank doesn't have a sale, the owner is still in debt, and NO ONE got to take advantage of the tax credit. On top of that, both us and the owner have since fired our realtors (whether it was their fault or not), so they worked for months on this with no reward.
I feel terrible for the owner, who may now go into foreclosure. I feel bad for both realtors, who didn't get a sale. Meanwhile, the big banks will continue to not care because they get bailed out by the government for mistakes they continue to make.
As an afternote; my wife and I have since found a different house which we are closing on soon!
Thanks for everyone's comments and if I were in the real estate market I would be pushing for better laws on short sales ASAP!!!
Both the Buyer agent and agent for the Seller have to be familiar with the process. The lender accepting the short sale has procedures that must be followed. This usually includes two appraisals, a complete title search (there are usually liens and judgments that must be satisfied also) a hardship letter from the Seller. These are just a few things required. After all requirements have been met the lender will approve accepting the funds that remain to satisfy their mortgage. Typically, this is a minimum a 90 day process. Keep in mind that process does not really begin until the Buyer of the property has been approved and received a commitment letter from their Lender.
The very most important part of a successful short sale purchase or sell is having REALTORSÂ® that are familiar with the process.
The banks processes are getting in the way of what everything would be common sense.
First Weber Group
Certified Distressed Property Expert
More comments--I really liked the answer from Johnny in VA and I am really pleased that behavior like requiring a signed contract prior to revealing all the documents will end! It has been really difficult for buyer's agents! How can you represent a buyer when you can't find out what the seller will do?
Here's my concern about the per diems:
Unless a real estate lawyer tells you that the language in the addendum they ask you to sign clearly lets you off the hook if the delay is in *any* sense their fault, you may be liable for the per diem. This has been true in one transaction I was involved in. Althought it was a foreclosure, not a short sale, we're talking about the same situation--to get the house, which sounds great, you are tempted to agree to their egregious terms and hope for the best.
But you should not expect the best. Small example: I represented a buyer on a bank repo. The contract stated that the utilities were to be turned on for an inspection. When they did start the arrangements to turn on the water, it turned out they had a large unpaid balance due. Without payment in full, the water could not be turned on, even for the one day we needed. Interestingly, there was more than one villain. The sheriff's department had received the check from the bank for the past due balance, and simply hadn't paid it! I think this was actually the subject of news reports. Quite a few years ago and I can't remember. What I do remember is that the bank was definitely out of compliance with the contract, which stated that all utilities would be on for the inspection. Yet they refused to give the buyer's hand money back! The buyer wasn't comfortable buying ( a contractor flipper got this house and made a killing,) so we had to take the time of 2 people representing our company, me, and the buyer to go to the magistrate. When I called the listing agent assuming my buyer's hand money would be refunded immediately, I was shocked to hear that that lender's policy was *never to give back hand money in any circumstances,* but rather to force any buyer to go to the magistrate. I'm assuming that this kind of behavior will be changed by the new regulations.
Each bank is different, so you *might* get decent treatment on the per diem issue, but I wouldn't count on it, especially if they know you are getting a mortgage and will not extend to a 5 week closing.
How are you doing?
Unfortunately, nothing one of the "bailed-out" banks do, would surprise me. How does loan fraud, RESPA violations, and obstruction of justice sound?
Those are some of the reasons the feds are instituting new short sale guidelines on April 5th. The Home Affordable Foreclosure Alternates program or HAFA, will provide lender's and homeseller's financial incentives on short sales, provided the homeseller has a qualifing "hardship", and can not qualify for a loan modification.
However, the lenders do have contingencies:
1. Potential loss.
2. Local Market Conditions
3. Timing of pending foreclosure
and my personal favorite,
4. Borrower Motivation
Maybe that's the issue. The bank doesn't think that either you or the homeseller is "motivated" enough. Perhaps, you could send the bank pictures of you working out, a la Rocky Balboa, getting motivated for your short sale. In these strange days, sometimes humor helps.
Then again, you could always write a formal complaint, sometimes that's the only way to hold them accountable.
Still, the only question remains is in what situation am I personally (out of my pockets) responsible (as the buyer) for per diems?
Much as I dislike the behavior above, I do not think they are *necessarily* doing it to be mean to buyers.
Rather than sitting around thinking how they can make your life miserable, they may simply be signalling to you to go away and let them sell for less to a cash buyer. They want a sure, certain deal ASAP rather than top dollar. So rather than saying "Let's screw this consumer" they may be saying "We need this out of inventory for sure by a certain date, and we will actually take a lower sale price from an investor with cash to close in a couple of weeks."
I am not saying these people, the mortgage lenders, are nice, or necessarily any wiser than when they jumped on the bandwagon to make loans people couldn't afford. And the fact that they ask you to make your offfer before they reveal all their terms is something still cannot believe is legal. But they may simply be trying to get their own heads above water. A quick, sure closing for cash is one way they can do that.
Of course each company you deal with is different. But, especially if you want the tax credit, I would not consider risking it by buying either a short sale or a bank repo.
I would start looking with a good real estate agent for a house in good location that might be dated or even dirty, but that you could at least clean and live in while you plan upgrades. This is a safer route to a good house, and may not cost more than those short sales. Remember that the low prices for short sale properties trade off against the risks you are now aware of. These are risks cash buyers, especially those who may be contractors, can afford to take, but that most owner occupants cannot! Don't do it without thinking very carefully about the worst case scenario!
Thanks again for the great help!
You can also find a lot of helpful info on our site dreamtown.com/blog
Best of luck with your situation!
Does that help?
Terrence Charest, e-Pro
I am being represented by a real estate agent with some prior experience on short sales, but they have not been very helpful or motivated on the sale. We put our original offer on this home in December 2009! The owner was unsure about selling it at that point. Then in February 2010 they decided the short sale was the best option. Mid March we put the first offer in to the bank asking for a mid May closing date. They responded on March 24th asking for an April 9th closing date. We responded by sending them a sales agreement with an April 30th closing date with an addendum requesting no per diem charges to us (the buyer). We JUST found out they declined those conditions. They will agree to April 30th closing date though, but now it is the beginning of April and that still seems too short. In what circumstances will I be personally responsible for paying out-of-pocket per diems?
Now whether it's "unethical" or not is up to individual interpretation. I would say that they are risking the sale falling apart.
If you are not being represented by a real estate agent, find an attorney.
Hope that helps,
Terrence Charest, e-Pro
How long did they give you? I am not finding that an issue here. And if you are close and cannot make it then you file for an extenstion and they almost always will give it. If they give it there is no per diem charge. Banks take a long time and then they go into the hurry up and close mode. They keep the timeline close but not unreasonable. I very rarely see the banks refuse an extenstion here as long as it is a reasonable time line for closing, ask the realtors in your area if they are having a problem with this.