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Lenjav, Real Estate Pro in Prince George's County...

Why should it take long for a short sale with theres a 2nd mortgage?

Asked by Lenjav, Prince George's County, MD Thu Feb 3, 2011

I put an contract on a short sale July 2010, with that in mind the interest rates was at 4.25 I have already invested monies on inspecions an appriasal. Now the interest rates are going up to 5.6, My Mortages company has loan in twice, and B of America has been the owner, had not agreed to the loan amount, I have give them 2 offer. Still waiting. I don't want to lose this home its an good investment. Help me. What should I do.

Help the community by answering this question:


Unfortunately, Lenjav, none of us here in the forum can answer you as to why B of A has not replied since July. (We can use this space to tout our own skills and services, but that really won't help you.)
I CAN tell you that viable short sales, in my area and with experienced agents and motivated sellers ARE NOT taking eight months to finish.
There are, of course, a lot of "it depends" in the answer, because every lender, situation, property, etc. is different. In general, short sale properties seem to be the leading edge on bargain properties right now. If I were in your position, I would do the following:
1. Ask if an appraisal or BPO has been done on behalf of the bank. If so, what was the date it was done? Banks will generally stick with the appraised value for 90 days, after which time a new offer can request a new appraisal.
2. Ask if the bank has an approved price for the property. The list price may have been set by the agent without consulting with the bank, so there may be a built-in cushion. How close is your offer to the approved price?
3. How long has the property been on the market? How many showings? How many offers? Banks want their properties to be "seasoned" a bit before negotiating too far from their approved price.
4. Have you received any counter offer from the seller/ bank? Are all the seller's documents in?
5. I have a list of questions I ask of a short sale listing agent BEFORE writing the offer, to see if the conditions exist for the short sale to even succeed AT ANY POINT. They relate to agent's experience and closed ratio, seller motivation, # and amount of liens, etc. I would be happy to send you a copy. Then, if after asking these questions, it seems that the offer will not go through, you should move on.

My ultimate advice? Sit down with your agent and find out, from the listing agent, what the status is. Find out whether this is a viable short sale. Then, if not, move on. That way, when the next property comes along, you won't be pining for the one that got away.

Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885, ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) 818.564.6591
1 vote Thank Flag Link Thu Feb 3, 2011
Hello Lenjav, I am going to tell you something you do not want to here-with a Short Sale-it may never happen. It is very common unfortunately that the banks take this long, but the listing agent should have gotten some feedback by now-I have seen short sale take 4-9 months and some never go through. If you do want to wait as you said you have invested money for inspections, then feel free to, but be patient and stay on your agent-also be aware that the bank could come back and say the price is higher. FYI-you should have waited to pay for any inspections until they have given you an approval, this is the standard process now for buying a foreclosure home.

Best of luck,
Heather Paul, Realtor
Coldwell Banker
0 votes Thank Flag Link Fri Apr 22, 2011
It is usually harder and takes longer time to get approvals for short sales when there are two loans or more. Part of the problem has to do with the fact that when the first and second are two different lenders, the first and second would be competing with each other for advantage; usually it is the first who tries to squeeze the second and convince the second to take less than what the second wants. This ongoing negotiation and tug of war may cause approval process to take a long time.
0 votes Thank Flag Link Tue Mar 15, 2011
Hi Lenjav,
If the 1st and 2nd are from two different lenders, the 2nd mortgage could hold hostage the deal by not releasing the lien until they get the amount they want. And usually the 1st lien holder is calling the shots for they could foreclose wiping out the 2nd one. It's a matter of time and negotiation with both of them.

Best wishes,
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0 votes Thank Flag Link Tue Mar 15, 2011
I regularly work with Bank of america on short sales, and can tell you that the delay can be caused by many factors.
1) Are the first and second mortgages Bank of America mortgages, or are they acquired debt instruments (Countrywide, Wachovia, Long beach, or Pacific Coast mortgages were alt-A and subprime notes)
2) Who are the investment banks underwriting the notes,
3) Are the existing notes FHA, VA, Conventional, or subprime?
4) How old are the existing mortgages?
5) What is the existing debt, relative to the appraised value and offer price?
6) What is the Debt to Income ratio for the present Seller?
7) Which office is doing the negotiating?
8) What are the terms of the existing mortgages?

... and so on.

I cam to real estate from commercial banking, and investment banking and have worked short sales and troubled loan deal since entering real estate. There is no precise formula, and the rules can change monthly. Sometime BofA will hold out a little longer and see if a higher offer comes in.

I have seen some FHA deals close after 23 months, which I have personally worked. There just isn't a precise rationale in their world.
0 votes Thank Flag Link Tue Mar 15, 2011
The 1st and 2nd lender have to approve the short sale. Most of the time the 2nd lender will not begin to negotiate their part of the short sale until the 1st lender has given approval. Not only do they both have to agree on the payoff from the short sale but there must also be sufficient time from both for closing.

Sara Mehrpouyan CDPE
Rodeo Realty
Direct: 818-903-2040
Dre Lic#01712757
0 votes Thank Flag Link Fri Feb 18, 2011
With 2 mortgages that means there are 2 lenders involved.
Just like how you are eager to purchase this home because it is a good investment, the opposite applies to the lenders because now they have to decide how much money they are willing to lose on the property and approve the sale price which is far lower then what they had originally lent to the buyer. And because of this the banks take their time on deciding how much they are willing to lose and who gets what.

Let me know if you have anymore questions.

David Akram
Realtor, DRE# 01891274
Century 21 All Moves
FREE Monthly Newsletter:
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0 votes Thank Flag Link Wed Feb 9, 2011
Short sales are all about waiting for the bank to make a decision. They have the power because they "doing the homeowner a favor" of allowing them to sale the house without paying back all the money they owe.

If there is a 2nd mortgage, it is extra difficult because now you have 2 lenders figuring out how much they're willing to lose and who gets what. The 2nd would get nothing in a foreclosure, but they still sometimes demand more in a short sale than the 1st is willing to let them have. If the 2nd doesn't agree to allow the sale, the whole deal is off.

On top of this, there are so many short sales that the bank negotiators are overworked and not always good at communicating or caring about each sale they work on. The agent who represents the seller often has a hard time getting any answers and everyone else is even more in the dark.

This isn't good news for you as the buyer because there is really nothing you can do but wait and keep your eyes open for another good deal - just in case. Also, you should know to have loan approval in place and ready to show the seller before making your offer. If you haven't done this, they won't take your offer seriously.
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0 votes Thank Flag Link Wed Feb 9, 2011
Hi Lenjav: I know this may not be the answer most buyers want to hear especially when they have found a property they extremely like, however, not every Short Sale listing will be able to go through. I usually pre-qualify my Short Sale homeowners to let them know if this property has a high or low potential for a short sale to go through so I don't give false expectations. However, we will still do our best to help the homeowners to have a successful short sale. If the offer price of the home is more than 10% lower than the market value, it will be tough for the offer to go thru. As a result, listing the short sale properties is one of a crucial point to set the right offers and expectations from the buyers.

From closing more than 90% of short sale deals, I can tell you that to the banks, it is a manor of net proceeds to the sellers, how well the listing agent is preparing the short sale package and how cooperative is the seller on giving the necessary documents to the lien holders. Unfortunately, in some cases, everyone can do all they can and still unable to get the Short Sale approved. Don't get discouraged, to increase the successful rate on actually getting a property, make sure you pre-qualify the listing property and get an agent who is very familiar with closing short sales.
0 votes Thank Flag Link Fri Feb 4, 2011
There is not much you can do in a short sale except to keep in touch with the bank. If you have an agent who will call the bank everyday and establish contact with someone there who will help your cause, that is the best way to go. If the second does not approve the pay off there is not a whole lot you can do except offer to give them more money than the first is willing to allow them. Sometimes with seconds there is an investor that needs to sign off on the short sale and since the loans have been sold so many times, there is no one that can authorize the short sale. Do your best to negotiate with the bank and establish contact with someone at the bank who can help you. At some point, if you are not getting anywhere the best thing is to let it go and look for another property.

Lori Matson
Keller Williams
0 votes Thank Flag Link Fri Feb 4, 2011
Lenjav: Do you have a buyer's agent assisting you or are you using the listing agent?

Keep asking the listing agent if there is any date or indication of when the bank will issue an approval for the short sale. It could be that the listing agent has had to begin the process over again, as is the case with B of A, at any point they can close the file an the file has to be "Re-Opened", by the listing agent.

I've had buyers wait for short sales that have taken 9 months. This is just the way it is for short sales.

This is the reason that many buyers refuse to put offers in on short sales and will only offer on Bank Owned properties!

Good Luck!
0 votes Thank Flag Link Thu Feb 3, 2011

Please keep in mind that ALL Short Sales are subject to lender approval , meaning the listed price usually doesn't mean anything unless it has beenapproved or it is listed in the neighborhood of market value. Also lenders take into consideration many things in addition to your offer when considering a short sale i.e.. neighborhood values and trends, how delinquent the current borrwer is and as some of the other Agents stated your agent and the agent handling the listing can make a world of difference. In my experince BofA is one of the easiest and quickest Banks to work with on short Sales .... I hope this helps and good luck!
0 votes Thank Flag Link Thu Feb 3, 2011
Has the Lender sent you a price they would approve? You should have a realtor working on your behalf in a complicated transaction like this.
0 votes Thank Flag Link Thu Feb 3, 2011
Hello Lenjay,
When buying a property in short sale, you should have not invested your money on inspections or appraisal. You should have written a purchase contract contigent upon these inspections, and you should have waited for the 1st and 2nd lien holders to settle on their respective pay-off amounts. Are you being represented by an agent?
0 votes Thank Flag Link Thu Feb 3, 2011
Hi Lenjav,
I'm glad that you posted this b/c other Buyers should benefit from 2 lessons from your Short Sale experience:
1) Always discuss your interest rate lock-in options w/ your Lender and make sure he/she can extend it for at least 6 months (you may have to pay for rate lock extensions which is just one of the many pitfalls with Short Sales).
2) A very common reason why Short Sale approvals can take so long is because of the 2nd lien holder. In many instances, the 1st lien holder's loan amnt is fully covered by the sale amnt and it's the 2nd lien holder who is reluctant to agree to take the loss. Sometimes approval is easier if both liens are serviced by the same bank.
I'm sorry you're experiencing so much difficulty with your Short Sale.
p.310.383.1141 | | lic # 01390707
(a division of Power Brokers Int'l | lic # 01520327)
0 votes Thank Flag Link Thu Feb 3, 2011
Talk with your agent, they are the one representing you and should be able to get information from the listing agent.

There are many questions as you may have read and each short sale is unique. B of A, I understand, is very difficult. There are a few ways to negotiate on short sales, B of A will use the Equator System. If the listing agent has done so, they should be able to log in and see where the file is. Understand that the lenders negotiators have several files on their desk, if anything is missing, such as the Seller's updated paycheck stubs, they'll move the file to the bottom of the stack. Also, they get a lot of calls and most not very nice, so it the agent isn't "kind" they may not be so forth coming with speed.

In any event, someone should be able to communicate to you what stage they are in the file review;
1) Seller has provided all their documents, hardship letter, bank statements, liabilities, assets, income, etc.
2) A Broker Price Opinion has been provided less than 4 months old
3) Your offer is signed completely by both you and the seller with all addendum
4) The listing agent has a signed authorization to communicate with both banks

I had a buyer write an offer on a short sale in early June and it closed the day before Christmas, 7 months! They waited. The listing agent communicated with us and sometimes he just couldn't get an answer.

Explain to your agent you need more communication. No one on a short sale wants to loose the buyer and start over again.
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0 votes Thank Flag Link Thu Feb 3, 2011
You should find out who's handling the negotiations. Make sure they know what they're doing. if all is good there, then you'll just have to wait it out.

We are a professional short sale service. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC
Serving all 50 states
0 votes Thank Flag Link Thu Feb 3, 2011
Sounds like the primary and the secondary are not agreeing with the terms of the negotiations. Both need to agree to the deal in order for it to come through. Often time the secondary is hugely discounted because it is entitled to nothing if it goes to foreclosure, and it happens that the primary and the secondary fight over the payoff.

My advice would be to have your agent perform a thorough CMA, the value of the property has most likely changed since July, and present another offer at 15-20% discount of the actual market value. Most lenders would accept such an offer.

Good luck!
0 votes Thank Flag Link Thu Feb 3, 2011
I was helping a home owner sell his home as a short sale with 2 mortgages. The second mortgage company has to agree to take a fraction of what they are owed. In my case the first mortgage company wanted the second mortgage to take $1,000 on their 24,000 loan. Did B of America come back with a counter offer to your offer? Tim's idea to offer more money might be a good idea. Just remember short sales can take many, many months to complete. Ask your realtor for his/her suggestions too as your Realtor has all the specific information about your sale. Your realtor can also talk with other Realtors in the office to see who has the best suggestions.
0 votes Thank Flag Link Thu Feb 3, 2011
Negotiating a short sale is something very arduous. Not for agents that want easy work and no overhead. I have a staff consisting of one experienced real estate attorney and two assistants in my office every day... we call and call and call... issue letters threats, offer candy whatever it takes to stay on top of the transactions... sometimes there is difficulty with our actual clients (sellers and buyers) providing information in a timely fashion... and we stay on top of them as well...
It takes determination, persistence, creativity, organization, support staff and much more (including longer transaction times)...

Your offer is probably not the issue... and if you had the best representation you would actually know what the exact issue is and not be guessing...

Be patient and communicate aggressively with your agent to make sure everyone is on top of it... if you don't like the answers, move on and get the next one with a team that is second to none.

Best of luck!

Ron Escobar, MBA
Broker and General Contractor
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0 votes Thank Flag Link Thu Feb 3, 2011
The presence of a 2nd lender shouldn't add too much time to a short sale. Is the agent handling the short sale an experienced short sale negotiator? If its not working out - and sometimes they don't - there are plenty of other good deals out there.

Richard Schulman
#1 Listing and Selling Agent
Keller Williams Westside Realty
0 votes Thank Flag Link Thu Feb 3, 2011
Sounds like the bank does not like your offers. If they have not agreed since July they are waiting for a better offer, give it to them or loose it. When there is a 2nd the deal will take longer because the primary will work with the 2nd to negotiate a deal. If the 2nd won't deal it can grind to a halt. You might need to offer more to make it work.
0 votes Thank Flag Link Thu Feb 3, 2011
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