Foreclosure in Sacramento>Question Details

Larry, Other/Just Looking in Sacramento, CA

Doing a Short Sale and Loan Mod at the same time.

Asked by Larry, Sacramento, CA Thu Sep 20, 2012

I have signed a cooperative short sale acknowledgement with BofA, and I have an approved short sale and an approved offer that is in escrow. But the Mod department just called me to come in for a meeting to discuss a mod. My realtor told me, since I signed the Coop form I relinquish my rights to a modification, I might not have any other choice but to short sale, since signing that form was the only way to stop my sale date which was 2 months ago and any sale date after. Do I have a choice and am I wasting my time going to the meeting with the Mod department?

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Shalabh Gandhi’s answer
Hi Larry, Would you mind sharing a conclusion to this matter. I am exactly in the similar situation and want to learn from your experience. So was it finally a short sale or loan mod ?
thanks
1 vote Thank Flag Link Tue Jan 15, 2013
Shalabh, I had a similar situation here in Sunnyvale with my clients, they were trying to do Loan Mod and at the same time, we listed the property for a short sale, We were told by the Loan Mod department that either one of the process needed to be canceled and closed for the other to move forward; My client end it up canceling the Loan Mod because they were not getting the principal balance reduced and they moved forward with the Bank of America coop short sale. Property in Sunnyvale was appraised at $500K They got total of $27,000 in relocation assistance paid at close of escrow (BofA coop assistance and HIN Incentive)
Feel free to call me if you have any questions.

Grover Barbaran, Realtor®
(650) 271-0308 Cell
Intero Real Estate Services
dre 01762774
http://www.GroverProperty.com
Flag Wed Jan 23, 2013
Hi Larry, Will you let us all know how it turned out?
0 votes Thank Flag Link Thu Mar 21, 2013
We are all obviously curious how this ended, if you have any updates please share. It looks like your post was last Summer/Fall so I assume SOMETHING has happened either SS closed or Loan Mod was finalized. It is unfortunate that these games are being played by the banks. They are STILL dual tracking SS files with Foreclosure files and keep the stress full bore the entire time your conduct a SS transaction. Then they go and dangle LOAN MOD carrots when you are finally getting your head wrapped around a SS. From my experience it is STANDARD PRACTICE for banks to submit mail packages to Distressed home Owners who have entered into a SS. Its as if it is automatic and not because they have reviewed any of your situation and really feel you are a strong candidate to qualify for the Loan Mod. Ever more disturbing only 25% of those who apply are approved, and 75% of those who actually complete a loan mod are back in default 6 months later! What this means is that they are not offering a permanent solution they are offering a band aid to get you back on track to send them money each month. A permanent solution is a FIXED RATE with monthly payments you can afford. This usually will also require some sort or principle reduction on your current loan balance. Unless one or both of these is accomplished (FIxed Rate and or Principle Reduction) it is usually not in your best interest to conduct a loan mod.
I hope you have passed through the stress and are in a better chapter in your life. Sounds like you have/had a great REALTOR help you get in a better situation when you needed it most.
0 votes Thank Flag Link Thu Mar 21, 2013
Every buyer should read this post and the replies. Larry has an APPROVED short sale with an approved contract in ESCROW. His buyers are probably real human beings who have been hoping to find a house for weeks, months, or longer. Now they have put their eggs into Larry's basket. Maybe they have already spent money on inspections and appraisal. They let a couple of traditional listings go to other buyers.

Every agent should show this thread to their buyers. If Larry goes for the loan mod, it may be in his best interest, maybe not. I won't speculate on that. What I will speculate, is that is buyers will be losing out, because they willingly chose to enter into a short sale purchase. Maybe the list price was more attractive than an equivalent house. I'm not blaming Larry or the agents. It is just the system. -

So buyers, read this cautionary tale, and be wary before you make an offer on any short sale. This could happen to you. I will have to bite my lip to keep from saying " I told you so"
0 votes Thank Flag Link Fri Sep 21, 2012
Jim...

I totally agree with you. The buyers have waited around, probably have been looking for a while and are now waiting to close escrow and move in.

Remember how that feels when you are excited about buying a home..? Then..."oops" the deal falls out because the stinking bank is holding out some hope to the Seller that they can maybe keep the place when they were turned down before for a mod. Forget for the moment the "weasel out" clauses... we've got another family involved as well.

The Banks in this country have a lot to answer for. Not only did the government create this problem in the 1st place by requiring the Banks to make loans to folks that weren't qualified which drove the prices up too high... now they jerk us around with situations like this.

Nobody is the winner here.

Isn't this just a sad state of affairs that never should have ever occurred in the 1st place...?

Rant over...

Make it a Great Day...
Flag Sun Sep 23, 2012
Jim Walker, Real Estate Pro in Roseville, CA
MVP'08
Contact
Larry, I accidentally deleted my first post after I read your reply.

I totally understand the stress factor. I think your agent did what he/she was hired to do (i.e., get your trustee sale postponed and the short sale approved). Since B of A had already declined your loan modification request, you had every reason to believe that a short sale was your best alternative. I don't know how long ago your loan modification was declined, but it's possible that you might qualify for a loan modification under the new HAMP Tier 2 guidelines that became effective on June 1, 2012. If you decide to meet with B of A, I would recommend that you ask for an explanation of why they think you might qualify now. Without knowing the reasons why they declined your application before, it's impossible to know if you could have a better chance now, which makes it very difficult for you to make an informed decision. Like you said in your reply to my now deleted post, it may just be false hope and if you pursue a loan modification and lose the buyer, you may be worse off than you would be if you closed this short sale.

How soon are you supposed to close escrow? Has your buyer already paid for inspections and the appraisal?

By the way, the HIN program does not apply to short sales that have already been approved. It only applies to pre-approved short sales (i.e., short sales that are opened without an offer). You may or may not qualify for the increased HIN incentive program if you lose this buyer and have to start from scratch.

Then there is the likelihood that the Mortgage Debt Relief Act (set to expire at the end of this year) will not be extended. A CPA or tax attorney could tell you if you would be affected if you can't take advantage of the Debt Relief Act.

Last, but not least, the required cancelation verbiage only gives you the right to cancel without penalty if you cancel prior to the written approval. The buyer just wants to buy the house and not lose money as a result of a cancellation by the seller.
0 votes Thank Flag Link Thu Sep 20, 2012
Ute Ferdig -…, Real Estate Pro in ,
MVP'08
Contact
Larry, I accidentally deleted my first post after I read your reply.

I totally understand the stress factor. I think your agent did what he/she was hired to do (i.e., get your trustee sale postponed and the short sale approved). Since B of A had already declined your loan modification request, you had every reason to believe that a short sale was your best alternative. I don't know how long ago your loan modification was declined, but it's possible that you might qualify for a loan modification under the new HAMP Tier 2 guidelines that became effective on June 1, 2012. If you decide to meet with B of A, I would recommend that you ask for an explanation of why they think you might qualify now. Without knowing the reasons why they declined your application before, it's impossible to know if you could have a better chance now, which makes it very difficult for you to make an informed decision. Like you said in your reply to my now deleted post, it may just be false hope and if you pursue a loan modification and lose the buyer, you may be worse off than you would be if you closed this short sale.

How soon are you supposed to close escrow? Has your buyer already paid for inspections and the appraisal?

By the way, the HIN program does not apply to short sales that have already been approved. It only applies to pre-approved short sales (i.e., short sales that are opened without an offer). You may or may not qualify for the increased HIN incentive program if you lose this buyer and have to start from scratch.

Then there is the likelihood that the Mortgage Debt Relief Act (set to expire at the end of this year) will not be extended. A CPA or tax attorney could tell you if you would be affected if you can't take advantage of the Debt Relief Act.

Last, but not least, the required cancelation verbiage only gives you the right to cancel without penalty if you cancel prior to the written approval. The buyer just wants to buy the house and not lose money as a result of a cancellation by the seller.
0 votes Thank Flag Link Thu Sep 20, 2012
Ute Ferdig -…, Real Estate Pro in ,
MVP'08
Contact
Here's the thing, Larry. If you were my sister in this situation, I would tell you to do the Cooperative Short Sale. With the loan mod, you might make temporary payments for a while and then get rejected for the loan mod. Where will you be then? Probably in the year 2013, after the Mortgage Debt Relief expires 12/31. Will it be extended? Who knows? What we do know is that exemption expires at the end of December.

Not only that, but a loan modification typically will not give a borrower a principal reduction. Without a principal reduction, it's like putting the gun to your head and not pulling the trigger for another 10 years Because all of that debt doesn't vanish or go away. You will still owe all of that money, and you will most likely still be underwater. A loan mod without a principal reduction is a temporary fix, a BandAid®.

With a Cooperative Short Sale, not only might you receive the $2,500 relo incentive, but you might qualify for the HIN Incentive program as well. I have clients right now who qualify for both, and they are getting $7,500 to $15,000 at closing. You won't know exactly how much until your agent receives a counter in Equator. Prices are unlikely to change much over the next couple of years, and if you maintain your credit, you could very well buy a new house just like the one you have now at the same price at which you're selling yours.

But this is not legal advice.

Elizabeth Weintraub
Broker-Associate #00697006
Lyon Real Estate
0 votes Thank Flag Link Thu Sep 20, 2012
My realtor did do a stand up job, I thought at the time that I exausted all my options. I applied for a loan mod with no avail. I was a 1 1/2 weeks to my foreclosure sale date, before I was referred to my realtor. He guided me through the whole process and recommended the Cooperative Short Sale with BofA to have a chance to post pone my sale date. And he did just that. 1 1/2 months later here I am with a an approved Short sale and in contract in escrow. I am now stressed out and wondering why BofA called me to have meeting with them to discuss a Mod for my loan which is located in Elk Grove.
Its just a stressful situation for my family right now and a hard decision since this short sale is guaranteed and the loan mode being not.
0 votes Thank Flag Link Thu Sep 20, 2012
It would be nice to be able to avoid this conflict and the contractual part of the agreements should be reviewed with an attorney for any clear resolution. I think Elizabeth gives the clearest answer on that.

However, I have observations to consider.

Most Bank of America contracts require some verbiage to both the listing agreement and the purchase agreement prior to their providing a short sale approval. That verbiage allows a cancelation of the contract FOR ANY REASON by the seller without penalty. Here it is for the purchase agreement with the buyer: “Sale is contingent upon the seller receiving the prior written approval of Bank of America”. A cooperative short sale indicates a streamlined approach to approval but prior to any approval, if you're offered a loan mod- GO FOR IT. The listing agreement verbiage clearly states that you can cancel with them, without any fees, for the same reason. Bank of America can give you guidance on that to help you.

Second, The same paperwork is used in consideration of either option- loan mod or short sale. In almost 99% of the cases, it is easy to determine if you could qualify for a loan mod. THAT SHOULD HAVE BEEN THE FIRST CONSIDERATION AND RULED OUT BEFORE GOING FOR A SHORT SALE. A Realtor who has not discussed your viability with your ratios in attempting a loan mod first is not doing the full job by you. It's too bad that it comes up late in the game but hopefully it's not too late so that you consider all of your options.

The objective in all cases is to provide the best solution to you in resolving your hardship regarding your current home and paying the mortgage. I believe all parties - your lender, your realtor and all others should have that in mind.
0 votes Thank Flag Link Thu Sep 20, 2012
Hi Larry,
In my exeprience with short sale lenders, they will not do a short sale and loan mod at the same time. It is one or the other. Please also keep in mind that just beacuse they are offering you a loan modification does not guarantee that it will be approved or be reduced to your satisfaction. It is best for you and your realtor to weigh the pro's and cons of each option before making a decision.

Thanks,

Anthony Carrillo
Cook Realty
(916)833-6266 cell
acarrillo@cookrealty.net
http://www.anthonycarrilloismyreagent.com
0 votes Thank Flag Link Thu Sep 20, 2012
You should ask the bank if you have relinquished your rights for a loan modification because if you would prefer to do a loan modification, you might be able to work something out with the bank. But you might not. That is always a risk.

It is possible that what your agent meant to say or perhaps you misunderstood is that you cannot do a short sale and pursue a loan modification simultaneously. Bank of America will not open two files at the same time. You must choose one or the other.

Elizabeth Weintraub
Broker-Associate #00697006
Lyon Real Estate
0 votes Thank Flag Link Thu Sep 20, 2012
looking for some similar advice. I am now in a loan mod with BOA which will go permanent after my April 1st payment. My situation is that I am now going to be relocating back up North for a new job opportunity. Unsure if I should simply contact a realtor about selling or attempt a cooperative short sale with BOA, hoping for some relocation assistance? Thanks for any advice.

Seller in Raleigh NC
Flag Fri Mar 28, 2014
Hi Larry, Would you mind sharing a conclusion to this matter. I am exactly in the similar situation and want to learn from your experience. So was it finally a short sale or loan mod ?
thanks
Flag Tue Jan 15, 2013
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