Home Buying in Alpharetta>Question Details

Hopeful On S…, Home Buyer in Alpharetta, GA

About how long will it take to get final bank approval on a short sale after they made a counter-offer, which we agreed to in-full?

Asked by Hopeful On Short Sale, Alpharetta, GA Fri Jul 29, 2011

Two months since we placed the offer. Seller has two mortgages (about $650k and $200k). Our offer covers all of first mortgage, but nothing for 2nd. Both BPO's are done, one higher and one lower than our original offer. Negotiators have been assigned for both banks and files are with investors. We wrote new purchase agreement for the full amount of counter and the sellers signed. Are we getting close or is this going to take another 2 months?

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Hi Hopeful,

Sounds like you are at the point where both banks are discussing the payoff of the second lien. That's good!

Since you accepted the first banks counter offer, we can probably assume it will get approved. That means everything is hinging on the approval of bank2.

Since you already know they are being offered $15,000, you may want to see if there is any way to get a faster reply on whether they wll accept it. That way, if they want more, you can try to get Bank1 to try and renegotiate the payoff before two weeks have gone by waiting on both banks.

Regards,

Joe Finnerty
Prudential Patt White Real Estate
Lehigh Valley, PA
1 vote Thank Flag Link Sun Jul 31, 2011
Hopeful,

There are many good answers to your questions in this list. I will share with you my experience from many short sale transactions. First it is important to remember that the short sale involves three entities: the seller, their lenders and you. The easiest aspect of the short sale is usually between you and the seller. The sale price is determined by market forces (and reinforced by the BPOs for the lenders). The most difficult and usually most time consuming part is between the seller and their lenders. Nobody wants to lose money on the sale of the home and the seller is often niavely hopeful they can unload the home with little or no money owed to their lenders. To determine how much the seller may on the hook for a transaction, lenders assess the seller's financial situation including income, remaining assets and their ability to continue to pay the mortgage. In a case where the seller lost a job and has limited or no income, the lenders will be more willing to forgive much of the debt. If, however, the person has assets and an income, the lenders will expect the seller to make some type of financial commitment, usually an interest free loan to be paid back over 10 years after closing. With a second lender, the situation is complicated because their lien position, in your case, has no underlying collateral. Both lenders must be satisfied by their proceeds from the sale AND be satisfied with the seller's payback arrangements if any. If either lender balks, no deal will happen or it will result in further negotiations and more time. The leverage the seller has is the ability to let the property go into foreclosure. Both lenders know that, so this is why they will try to work things out.

So I think the answer to your question depends on seller's current financial situation (the worse it is the more likely a quick resolution) and the seller's willingness to accept some type of payback arrangement if they have income and assets. I would make it a priority to have your agent find out more about the circumstances surrounding the seller's reason for selling. Also, we have employed 3rd party short sale companies ($695) who are able to speak directly with the seller's lenders and therefore provide clarity to whether this deal is going to happen soon or not. Email me and I can provide further information on this option.

Timothy Brown | Managing Broker
Academy Residential Mortgage, Inc.| tbrown@academyresidential.com
11380 Southbridge Pkwy, Suite 200 | Alpharetta, GA 30022
678.468.5626 x110 | fax 678.935.1156 | cell 678.467.9959
1 vote Thank Flag Link Sat Jul 30, 2011
Hence, the perfect reason why anyone who has a remote time frame deadline should never be involved in a short sale. I list short sales and the first question I ask agents who show interest is, "Do your clients have a time frame in which they need to buy?" If the answer is yes, I discourage showings unless the buyer clearly understands it could take forever to close a short sale and sometimes that doesn't even happen. I would make other "short term" plans regarding where to live and schools b/c there is nothing short or quick about short sales. Especially with two mortgages involved. I hope it works out for you.
1 vote Thank Flag Link Sat Jul 30, 2011
Technically, when you have two liens you need two short sale approvals. Sounds like a lot of progress has been made with Bank1.

At $650,000, which you agreed to, they are offering Bank2 $15,000. Now, you need to know if Bank2 will accept the $15,000 and release the 2nd lien. Bank2 may say they want $20,000. Then you need to go back to Bank1 and renegotiate the first approval. This could possibly go back and forth a few times. Bank2 can dig in their heels because if they don't release the lien Bank1 can't sell the property.

Hopefully, Bank2 has been involved throughout the complete short sale process and you just need to get both Banks to agree on the amount "you pay" and "they share".

Regards,

Joe Finnerty
Prudential Patt White Real Estate
Lehigh Valley, PA
1 vote Thank Flag Link Fri Jul 29, 2011
I'm sorry you don't feel like there's anything "short" about a short sale. The reality is it could take a very long time or it could happen soon. There is no telling when it comes to short sales. If there's no money for 2nd you have zero chance of approval. You're going to have to throw a bone to second in order to disappear. At first they might ask for 10% of LB, but then closer to foreclosure date they realize they get nothing, so you gotta offer them something to go away or they will play you to the end. They are gonna get $1,500-$3,000 outta someone or they can just let the whole thing go to foreclosure and lose it all. They want something. That's the game to play with second mortgages. You're going to have to structure a deal with second getting something or you won't ever get it done. Period.
1 vote Thank Flag Link Fri Jul 29, 2011
Kind of late but did you get an appraisal on this to ensure it's financially sound? Alpharetta is healthy but the 500K+ market has had quite the adjustment and inventory is going to be around for some time.

Hank
0 votes Thank Flag Link Tue Aug 2, 2011
All - I got an update today that the new offer (post counter from banks) is with the investor at both banks. Comments and guesstimates as to if / when we may get final approval are welcome!

Kim - This short-sale is in GA. Not sure what (if any) rules there are here for payment to a second mortgage on a short sale or foreclosure. I have heard that it's better for the bank to take a short than let the house go into foreclosure, which makes the slow process seem counter-productive.

Jack - The banks already did make us a counter, which we agreed to in-full. We believe they are allocating $15k to the 2nd. Is that an amount they will likely accept, or do you think they will want more?

Thanks
0 votes Thank Flag Link Tue Aug 2, 2011
Question: What state are you in? Each state has their own rules for going after the money after a foreclosure. Often the 2nd doesn't want to go to foreclosure because they have no rights after that. This will motivate them to work a deal with the 1st. However, they have to be fighters and try to get as much as possible from the 1st before that. I remember when I thought real estate was just negotiating between buyers and sellers. Welcome to the new world of ALSO negotiating between lenders!

Good luck!
0 votes Thank Flag Link Tue Aug 2, 2011
The good news is that both banks have assigned negotiators. However, since there is nothing being offered to the 2nd my experience is that you will be receiving a counter; the 2nd is unlikely to walk-away with $0 on an unpaid balance of $250k. Depending on the lenders and their negotiators, you may have several weeks left.

Jack Gillis, M.B.A., J.D.
Jack Gillis Realty Advisors
Nathan Grace Real Estate, Broker
5619 Dyer Street | Suite 100
Dallas, TX 75206
Cell: 214.718.4910
Email: Jack@JackGillisRealty.com
0 votes Thank Flag Link Tue Aug 2, 2011
No Mortgage Insurance on either the 1st or 2nd mortgage on this short sale, so I guess that's a good thing. Based on Joe Finnerty's post (thanks Joe), I emailed the sellers' title company / law firm and asked if the $15k allocation to the 2nd bank was already discussed between the two banks / investors as an amount that would likely be approved by the 2nd. She replied back with "yes" and "we should have approval from 1st next week and approval from 2nd by August 15 or before." Sounds promising, but I've heard this "should be..." a few times already. Would like to hear feedback on whether or not this timing sounds realistic, based on the events that have already occurred. Thanks!
0 votes Thank Flag Link Sat Jul 30, 2011
It is never short with short sales. So many variables that can take place. The longest I have had was 1 year and 1/2 and that was with one bank.

Best of luck,
Nancy
0 votes Thank Flag Link Sat Jul 30, 2011
Nothing short about short sales. In my experience it could take anywhere from 2 months up to six months depending on the Bank. Good luck.
0 votes Thank Flag Link Sat Jul 30, 2011
Hopeful,

Hope is not a strategy.

Patience is a virtue.
Web Reference: http://Intowninsider.com
0 votes Thank Flag Link Sat Jul 30, 2011
Quite truthfully you can probably go on an extended vacation before an answer may arrive! Banks are painstakingly slow and there is NO timeline. Wish you well!
0 votes Thank Flag Link Sat Jul 30, 2011
The issue with short sales is you really can't get a reliable answer out of anyone in the chain. Even if someone appears helpful, odds are they will be ineefective the entire way. This is precisely why I avoid them with my folks, I much rather let the house roll into foreclosure and watch for it to re-emerge with the liens addressed and it be in one pipeline. REOs are a pain but nothing compared to shorts, it's possible you could come away with nothing if the second decides to foreclose.

Another variable is the mortgage insurance company - many have become obstinate with the process as they've been paying out millions. If they're involved it's another level of nonsense.

Lean on your agent, while they may hit walls they need to keep blasting until they find someone that can at least give them odds of success.

Hank
0 votes Thank Flag Link Sat Jul 30, 2011
Thanks for your response David. I forgot to mention that when the bank counter-offered, they asked us to increase the offer from $620k to $650k and said that they were allocating $15k to the 2nd mortgage. Will this help get both banks and the loan investors to approve? As I mentioned earlier, we wrote up a new purchase agreement for the full amount requested. We're running out of time to get a house and get our kids registered for school, so we're wondering how close we may be at this point.
0 votes Thank Flag Link Fri Jul 29, 2011
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