Home Buying in 92584>Question Details

Benben, Home Buyer in 92584

Short Sale Offer accepted but went into auction why???

Asked by Benben, 92584 Sun Mar 14, 2010

I'm still waiting on the bank to send the papers back they accepted my offer so I sing my paper work but they haven't send anything back it's been 8 months.I was looking on auctions and I saw the house what going on my agent is the seller and the buyer and she doesn't know anything

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Benben,

Short sales are a negotiation between lender and a Listing agent.
The lenders are trying to squeeze out every dollar they can out of the deal.
In doing so they take their time, they tell the listing agent whatever they want to and until they approve it put nothing in writing.
Quite often the lenders representative quits or the file gets reassigned to another loss mitigator.
Some times this is a natural progression or escalation.
You need to understand that short sales are not guaranteed by anyone.
You also need to understand that when a buyer signs a contract to purchase a home the recourse in the contract when someone fails to pay is to foreclose upon the home.
No where in the contract between the owner of the home and their lender does it say short sale, short sell, accept less than is owed, etc.
The foreclosure department is doing its 111 days from the date of Notice of default here in California.
They are two different departments.
The listing agent has to try to get the foreclosure department to put a "stay" on the property.
This may or may not happen. 10 days 7 days 30 days. and what they say and what they do are two different things.
BANKS play by their own rules.
They are not accountable for what they say... only what is in writing. They are apprehensive about putting anything in writing that limits their capabilities.
The banks change their policies often and can be a case by case basis.
The Loss Mitigation department, is working to try to not foreclose upon the property and to save the bank money by selling the property now, selling it without it becoming empty, and not having the cost of actual taking the asset or house back.
The idea is to reduce the losses.
Some properties have lenders insurance on them so they would prefer to have the home be foreclosed as they get 80 cents on the dollar of the note on insured loans usually. Not always do the banks choose this avenue as doing so will raise their rates. There is a calculation that each bank loss mitigator goes by and they hold that calculation sacred.
The main reason this sale did not go through is
A SELLER CAN NOT SELL THEIR OWN HOME IN A SHORT SALE! Be they an agent or not.
Banks just don't allow it.
To understand more you can cruise by http://www.menifeeshortsales.com
A short sale must be an arms length transaction.
It is also not a good idea if the Broker listing the house is representing the buyer.
This raises a red flag with the loss mitigator as likely bank fraud.
Unfortunately a very small percentage of agents do short sales and understand them.
Many agents try which is why only 1 in 8 short sales actually sell.
Some short sale agents have a high percentage of short sale closings 75-90 percent sell.
and lastly, a seller must qualify to short sell.
This means they MUST have a valid reason for selling their home ( Not just i'm upside down )
They must prove that they have no money left to continue to pay on their loan or it is rapidly approaching.
They must show something changed from when they bought the home to now which significantly changed their income. loss of job, change of job, hours cut, divorce, health or medical issues, etc.
If you know of someone like this, let me know.
I suggest you consult with a Real Estate Attorney and a CPA as a buyer or a seller before you make any decisions on a defaulting property.

Harold Sharpe - Broker
So Cal Homes Realty
(951) 821-8211
harold@socalhomesrealestate.com
http://www.socalhomesrealestate.com
California Department of Real Estate License # 01312992
2 votes Thank Flag Link Sun Mar 14, 2010
The short sale process and the foreclosure process run simultaneously. In other words just because an offer has been placed on a property as a short sale does not stop the clock from ticking. Unfortunately, in many cases the short sale department does not communicate with the foreclosure department so if the listing agent is inexperienced in handling a short sale they might not be taking this time-line and deadline into consideration.
1 vote Thank Flag Link Fri May 4, 2012
Do you have a signed copy of the purchase agreement back from the seller/home owner, from 8 months ago?
0 votes Thank Flag Link Sun Mar 14, 2010
Benben
The foreclosure dept does not talk to the short sale dept. The listing agent has to keep an eye on and get it pulled back out of auction. If it idid not go to auction yet, she can call Mon and chances are good the agent can get a postponement.

Good Luck!!!
Web Reference: http://www.di4homes.com
0 votes Thank Flag Link Sun Mar 14, 2010
That happens all the time.

Why?

Because short sales and foreclosures are handled by two different departments within a bank. Think of it as a race with two runners. The first one who crosses the finish line first wins. You were betting on the short sale runner. And he's getting close to the finish line. However, the foreclosure runner is also getting close.

You say "it's been 8 months." Eight months since what? You sent your offer in? The offer was approved? If the former, that means nothing. If the latter, then what's the holdup?

Sometimes you can persuade the short sale department to communicate with the foreclosure department to get the foreclosure delayed. But that'll only occur if the short sale really, truly is going to occur.

I'm not sure what you mean when you say "my agent is the seller and the buyer and she doesn't know anything." How can your agent be the seller AND the buyer? And ideally, your agent should have been neither; your agent should have been independent of the situation. And your agent certainly should know what I've just described above--that short sales and foreclosures are processed entirely separately.

What you (or maybe your agent) have to do is get the paperwork from the bank for the short sale, and get the short sale people in the bank to communicate with the foreclosure people.

Hope that helps.
0 votes Thank Flag Link Sun Mar 14, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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