Home Buying in Rochester>Question Details

Joe Seroski, Home Buyer in Rochester, NY

My girlfriend and I have an accepted offer on a house and were set to close. Two days before closing the attorney called us and said the seller owes

Asked by Joe Seroski, Rochester, NY Mon Jan 18, 2010

money on the house and will not be able to cover. Now they have to go to a short sale. Everything was ready to go: we had an appraisal done, a home inspection, an approved mortgage commitment. Should I be optimistic about the bank approving the short sale, or should we walk and look for another house? We have both attorneys working hard and both the seller and buyer agents.

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Dear Joe,

I would advise you to discuss with your attorney what your options are. This whole situtation seems a bit messy. I have heard of closing being delayed but have not heard of a situation like this before, not to say that they do not happen. Since you have already invested time and money I would suggest that you find a common ground and discuss with your real estate agent. Your attorney should be able to give you a specific number on how much more the bank is looking for and at that point your attorney can advise you as to what your options are. If you cannot offer more, you may have to walk away from the deal. But the banks are usually willing to offer a fair price but this all depends on the situation the homeowner is in.

Good luck.

Nirmala Caraballo
Real Estate Agent
Cruse Realty
Tel.: 646-479-7873
E-mail: nhcaraballo@yahoo.com

Good luck.
1 vote Thank Flag Link Mon Jan 18, 2010
wow, how long has this house been listed!? This is the sort of thing that we continue to ask! Where the seller is at, are they behind in their mortgage payment, do they have enough money to close...these are questions on the listing contract! Short sales can take 4 months. First, you have to ask yourself whether you want to wait that long. Are you needing to close in time for the tax credit? Are you able to go rent month to month, or stay were you are for a while? Hopefully, the sellers attorney is talking to the loss mitigation dept asap. Trying to get a hardship letter together from the seller, and send all of the sellers financial information asap. There is a list of all things that need to be sent, if those are sent right away, there is a good chance that they will have an answer in 30-45 days. Most short sales has been longer than 60 days lately! Hope this helps a little.. A new offer should be submitted with a drop dead date for you to be able to move on, IF you really want the house. Good luck!
1 vote Thank Flag Link Mon Jan 18, 2010
Just how short are sellers I wonder, and how could they not have known beforehand--how badly do you want this house--the answer to that question should help you determine if you want to wait around or not-- not knowing any numbers tough call, what is your attorney suggesting--he/she will offer the best advice.
1 vote Thank Flag Link Mon Jan 18, 2010
Well, umm, I would hope the agents are working hard, especially the listing agent. Frankly, you should never have been put into that position.

As for the bank approving the short sale, that depend on a lot of factors--which lender it is, how much the lender or lenders will have to absorb, what the comps are (I know you had an appraisal, but the bank will want one of its own), and more.

Even if the short sale is approved--and it may be--the question is: How long will it take? If could be as short as a month, or as long as 6-9 months. And that means various levels of inconvenience (I imagine you had scheduled the move) and difficulty (you financing commitment may well expire) ahead.

Keep in very close contact with your Realtor and your attorney to make sure that the process is expedited as much as possible.

Good luck.
1 vote Thank Flag Link Mon Jan 18, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
I am not licensed in NY but let me just ask this/mention this.

Is the home listed with a realtor now? Wouldnt they have asked the seller what they owe, show them a estimated closing cost sheet and the seller go "hmm i dont have enough to settle the mortgage?"

Last minute things like this bother me. It should not happen. Extending settlement due to time to get some repairs I can see but this is something that should have been addressed from the beginning when the offer was made.

1 vote Thank Flag Link Mon Jan 18, 2010
Can you afford to pay the extra? If so is the house worth the extra money to you? Is the bank going to take 6 months to respond and do you have 6+ months to wait? Get a time frame if possible.
Johnathan Mullaney
Village Land Shoppe
0 votes Thank Flag Link Tue Jan 19, 2010
A title search performed earlier (before you got the mortgage commitment) would have exposed this issue sooner.

Like Michael, I'm also aware of this happening from time to time, and there are several ways to work around this.
Besides pursuing a short sale (which can take a long time), you could do a short paper. Another option, if the property appraises close to the amount of the loan (minus the amount that it would take to reinstate that loan), then you could offer to buy that property with a wrap (a form of seller financing) with the amount to reinstate that loan as your down-payment. This way you could close without worrying about your rate lock expiring.
0 votes Thank Flag Link Tue Jan 19, 2010
I would see if the attorney's can work something out with the bank.

I know I am going to get some heat for saying what i am going to say but if it boils down to a couple grand and there is enough money in the pot in terms of commissions, maybe the buyers/sellers agents can chip in to make the deal close? Now I dont know the sales price, how much commission is there etc but if it makes sense it is an option.

:prepares to get the nasty hate mail to follow:

but the way I see it is this...the deal can close if it is a couple grand apart...id rather close the deal then wait 6 months for a short sale, then eventually get paid....to me its all about my personal brand...if i have to cut back on my commission to make the deal close because there is no other way, then im doing it.

brand equity goes a long way....
0 votes Thank Flag Link Tue Jan 19, 2010
If in fact they only owe $5-$7 thousand it may be something your attorney and the seller's attorney can work out with the bank's attorney-- if the bank allows, late fees can be waived, thus bringing the amount owed down a little more --worse comes to worse if this is the house for you, consider paying a little more, especially if the appraisal came back with a favorable number--again stay in close touch with your attorney as he/she is your best source of advice.
0 votes Thank Flag Link Tue Jan 19, 2010
Unfortunately that is happening more and more lately. I had my first instance 2 months ago and i represented both the buyer and seller. It was only discovered about an hour before closing -- attorney's dragged their feet looking for judgements.

Unfortunately in that situation the seller was unable to secure the answer in a reasonable amount of time from the bank and it ended up dying. It's unfortunate that you are out the money for the inspection and other costs -- you could always try and get it from the seller ... but it sounds like he's in a bad situation and you might not be able to get anything from them.

I would recommend that you ratchet up your search and if the next perfect house comes up ... you can cancel this deal and go into that one. It's not ideal ... but it's the only thing that you can do to ensure that you aren't out both money now and a house when the tax credit expires.

Good luck!

Michael Walker
0 votes Thank Flag Link Tue Jan 19, 2010
Well, unfortunately this all depends on the bank and their attorneys and the responses vary greatly. If you really like the home, keep your offer in but go shopping again to line up Plan B - you may need it or get tired of waiting.

Good luck.
0 votes Thank Flag Link Tue Jan 19, 2010
Hi Joe - The listing agent should have all the answers to this question. Have your realtor work with the listing agent to get the answers that are necessary to resolve this problem. Also consult with your lawyer on this matter. It all depends on how much money the seller owes the bank.

Do you know if there is a second lien on the house?
0 votes Thank Flag Link Tue Jan 19, 2010
Thank you all for your responses. I believe, from what we know, the seller owes around 5-7K, mostly in missed payments, late fees and interest. Our attorney is trying to get a time table so we can tell how long this will take and decide if we really want it. The frustrating part is that we will lose the engineers inspection, appraiser's fee, and have to pay for those for our new house. Not to mention that we will lose our interest rate that was 4.89%. Plus, we already changed our address, had the moving plans set up, took off of work, and have to be out of our apartment at the end of this month.

Truly has been one of the worst experiences and has tainted the excitement of buying our first home.
0 votes Thank Flag Link Mon Jan 18, 2010
Apparently, from what we have been told, the seller lied to the agent and had a signed agreement stating the mortgage was paid up in November. Thousands of dollars are owed to the bank, and now we, the buyers, are playing the waiting game. As first time homebuyers, it is extremely depressing. Our agent said he has never heard of this happening.
0 votes Thank Flag Link Mon Jan 18, 2010
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