Foreclosure in Slocomb>Question Details

Tracy, Home Buyer in Slocomb, AL

Why are short sales so difficult? We had the pre-approval letter and offer was not far from asking price,but yet the bank let it go into foreclosure

Asked by Tracy, Slocomb, AL Wed Dec 23, 2009

instead of accepting our offer. Should the realtor been more aggresive or is this a common thing? With the housing market the way it is looks like they would jump at the chance to get a sale.

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Tracy the original loan could also have been with one of the lenders that closed and FDIC has a loss share agreement with the current bank. If the property goes short they may get less from FDIC. If they force it into forclosure they get compensated fairly well for the loss. FDIC even picks up the forclosure costs and property taxes while the lender is reselling the property.
Here is a link to the FDIC Q&A area on loss share. According to their numbers we have a future loss of only 80 billion!

http://www.fdic.gov/bank/individual/failed/lossshare/
Web Reference: http://www.Find1Home.com
0 votes Thank Flag Link Thu Dec 24, 2009
I think Grace is right. Also, I think it has a lot to do with the person that it is assigned to handle it. Sometimes it gets lost in the "red tape".
0 votes Thank Flag Link Thu Dec 24, 2009
Hello Tracy and thanks for your question.

If the foreclosure took place within the first 30-45 days after your offer was submitted, as Keith noted below, the culprit will probably be the bank itself. For the larger national banks with many "layers" of departments working with one property, often the loss mitigation department (the group that reviews and, ultimately, (hopefully) accepts short sale offers) and the foreclosure department are not "talking" to one another. While loss mitigation may be aware of the short sale, it has not progressed enough through the bank's "system" to alert the foreclosure department and, thus, the foreclosure department sets up a Trustee Sale and the home is sold before a short sale has even been reviewed. I've heard of this happening more often than I would care to repeat and it is why the listing agent's role in a short sale is so pivotal to the successful outcome of the short sale.

As for your particular situation, it certainly may have been that the short sale was started too late in the process to stop the foreclosure. Also, please remember that the listing price is one that is set by the sellers, and NOT the bank. As a result, while your offer may have been close to the listing price, the real issue is how close was your offer to the "appraised" price of the home or the price generated by a BPO (broker price option)? If the price you offered was significantly less than the BPO/Appraisal price, the bank may simply have opted to foreclose on the home, collect any mortgage insurance money, wipe out any second or third lenders, and resell the property at a later date. There are many extenuating circumstances that dictate what happens to a home that is being sold in a short sale.

I am so sorry to hear that the home was foreclosed, but, rest assured, there are other homes, and probably one that will be better than this one in the near future. Good luck!!

Sincerely,
Grace Morioka
Area Pro Realty
0 votes Thank Flag Link Wed Dec 23, 2009
It's not the Realtor's fault for not being aggressive enough--unfortunately, the banks have various departments that often don't communicate and one arm doesn't know what the other is doing; and you are absolutely correct in saying they should have jumped the minute they had a sale--but again, unfortunately, too much red tape gets in the way.
0 votes Thank Flag Link Wed Dec 23, 2009
the agent will not disclose the bank that has the loan
0 votes Thank Flag Link Wed Dec 23, 2009
Have you called the bank and tell them what happened? Lots of time differnt departments are working on the case at the same time. IF the loss mitigation department did not communicate with the foreclosure department , the foreclosure department could of taken it to foreclosure by accident.

I would contact the bank and the foreclosing attorney to make them aware of what happened and see if you can get the sale reversed.


Keith Manson
First Weber Group
Certifed Distressed Property Expert
Metro Milwaukee
0 votes Thank Flag Link Wed Dec 23, 2009
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