Foreclosure in Canton>Question Details

wohlf1cw, Home Buyer in Canton, MI

We are buyers, awaiting short sale approval. We just found out house is scheduled for sheriff sale auction. Can they auction out from under us???

Asked by wohlf1cw, Canton, MI Tue Feb 5, 2013

our offer was accepted by sellers August 30, 2012. We have been waiting for short sale approval for the past 5 months. We were told a few weeks ago that servicer (Nationstar Mortgage) is almost done with process but they need to send to Fannie Mae for approval which can take 2-3 weeks. However, we have been told since November 3 that they're almost done. We no longer believe anything they tell us. I appreciate any advice. Thank you.

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Simon Campbell’s answer
Wow, "approval" since August. What a mess! As if foreclosure wasn't hard enough, lenders have to drag their feet and torture home owners even more.

If you cannot get them to postpone the auction, I would advise your buyer to attend the auction if they want the home. As long as their purchase price is going to cover the loan amount (or maybe a little more) then they will just be competing with the bank (which they are doing right now anyway).

Another option is that if the property is sold at auction. The State of Michigan allows a 6 month redemption period. So what you do it get the money from your buyer (needs to cover the redemption costs), payoff the amount owing and then transfer the deed to the Buyer.

Good luck!
1 vote Thank Flag Link Tue Feb 5, 2013
If the Sheriff's sale cannot be postponed, the short sale becomes much less likely. Have whoever is negotiating the short sale try to postpone the sale. The seller and the bank has much less incentive to continue with the short sale after foreclosure.
1 vote Thank Flag Link Tue Feb 5, 2013
thank you for your insight. I did see that today the listing agent requested that the short sale be postponed. We will keep our fingers crossed for positive news. I appreciate your thoughts on this. We are first time homebuyers so this is all very new.
Flag Tue Feb 5, 2013
Here's the best advice:
You are not under Contract, so just move on!
There are a lot of houses out there.
1 vote Thank Flag Link Tue Feb 5, 2013
Thanks Ron. We have been debating that. We are expecting our first baby in May and are worried we won't be able to find anything and get in before then. My husband refuses to look outside of Plymouth-Canton school district. We are also worried that we have put all of this time into it and if we back out, it may be approved shortly after.
Flag Tue Feb 5, 2013
Lenders can and will do whatever they darn well please. Nationstar is a nightmare to work with, I know from first hand experience. If you have a good negotiator working on your short sale, he/she should be able to get the sheriff's sale postponed so that the closing can occur. In the past this was easy today. Today, however, the lenders have become more difficult to work with. Once the house goes to sheriff's sale, in many cases, the short sale will continue. This all depends on the investor and if they will allow it.

What happens in a short sale is the normally the lender will bid on the house the amount that is owed on the mortgage plus late fees and legal fees. This is called an full bid. Sometimes, the lender will bid at sheriff's sale an amount that is much less than what is actually owed on the mortgage. If this is done, it is called an "underbid". In both cases, however, the homeowner still owns the house for the next 6 months. This is called the redemption period. If the lender bid the full amount, short sale negotiations can continue. If, however, the lender "underbid", the homeowner could sell the house to you directly without lender approval.

Hope this gives you a little better understanding of the process. If you need a better explanation, feel free to contact me.

Kathy Persha, Realtor
Nextage Advanced Realty
1 vote Thank Flag Link Tue Feb 5, 2013
It is true that it is not a good idea to switch brokers during the short sale negotiations. But once the approval is received, the homeowner cannot really switch to another broker to close. If the sheriff's sale does occur, there is a good chance that the lender will make the homeowner start the short sale all over again. When is the sheriff's sale scheduled for?
Flag Tue Feb 5, 2013
Thanks so much Kathy! We were also told that even if house is auctioned off, it would not affect us as long as we close on the house before 6 month redemption period is up. Nationstar has absolutely been a nightmare to work with. We were told in the beginning of November that we should be able to close before the end of December. We were then told at the beginning of January that we should have short sale approval by the end of the month. Then, we were told at the end of January that the servicer is almost done but then has to send to Fannie Mae for approval. The selling agent is Elias realty which we know has been blacklisted. They told us they would switch the listing to another broker after the short sale approval so that we can close. They said if they switched it before, we would have to start short sale process all over again. We're just not sure what to believe anymore.
Flag Tue Feb 5, 2013
Yes they can. You will find a very good article on short sales at Scroll down the colum on the left. Very informative. Stephen Webber
1 vote Thank Flag Link Tue Feb 5, 2013
thanks Stephen. I will definitely check out the article.
Flag Tue Feb 5, 2013
" The seller and the bank has much less incentive to continue with the short sale after foreclosure. "

I guess so since the seller will no longer own the house, someone else will and likely the bank that foreclosed !!
0 votes Thank Flag Link Tue Feb 5, 2013
Tim, in Michigan after Sheriff's sale (foreclosure) the former owner is given 6 months redemption period to occupy the home and given the opportunity to re-purchase the home from the foreclosing bank (see Kathy's comments below regarding Redemption period). Foreclosure is different state to state.
Flag Tue Feb 5, 2013
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