I wish everyone knew up front time is of the essence on a short sale. Around April of 2010 many of the banks made a decision, if it does not sell by foreclosure date, then foreclose. Keep in mind a couple of things. Sellers know the day they don't make the first payment, they are getting away with something,...
If they called to short sell that day, or even within a couple of months this last minute deal thing is a thing of the past. Oh ya I forgot to mention, when an agent knows they are within a month of the trustee sale, it may be time to not even bother to list it. As a home seller I know it sounds insane. But here is the reason, people were listing the properties, making the banks think were trying to sell their home but never allowed their home to be shown. So the banks came up with a blanket idea,... time limit.
I am no fan of the banks. but I do understand why they do it. If you knew people who run the banks and had the opportunity to meet with them and talk to them you would see why.
I do agree about the insanity, of selling a house for less in foreclosure when they had an offer on the table. ... and selling it for less no less. The bank is not a person who thinks. It is a machine and goes by policy.
Harold Sharpe - Broker
So Cal Homes Realty
California Department of Real Estate Broker License # 01312992
Lenders are interested in the FINAL NET, not the selling price. That net gets influenced by factors we Realtors don't always know or are privy of knowing e.g. a portfolio insurance the investor purchased that this loan is part of. It may get triggered by foreclosure. That's a different insurance from the one a buyer purchases when the down payment is less than 20%.
The lender simply compares the FINAL NET for both, short sale vs foreclosure and goes with the highest net. What I object to is why am I not told at the beginning what kind of net the lender must have to accept a short sale. Not knowing that puts us in a volunteer category involuntarily!
I went into the loss mitigation department of a large bank that I won't mention and was amazed at how similar it was to a traditional "Boiler Room" with a bunch of pitch men with headsets over their ears, shirt sleeves rolled up and sweat running down their cheeks, files stacked to their eyebrows and scattered all over the floor. As my lovely wife so aptly puts it "It's a real "Fuster Cluck"!
It's possible they still netted more because they didn't have to payout to a 2nd lien holder as they were completely wiped out in the foreclosure action. If there had been a $200K 2nd, for example with a different bank than the first, they were looking at having pay out to them $20K.
If they truly Approved your short sale & you were within your closing period before an expiration date by the bank, then they should not have foreclosed.
Realtor Since 1996
Main Street Realtors
Short Sale Expert
Sorry to hear of how this worked out!