Home Buying in Dallas>Question Details

Faith, Home Buyer in Dallas, TX

Who decides closing date on a short sale?

Asked by Faith, Dallas, TX Sat Feb 12, 2011

Between the time my husband and I got our offer accepted from the seller a few amendments were submitted while we were waiting for their lender to approve the short sale contract. On December 20th an amendment was signed by both parties to extend the date in the Short Sale Addendum to January 15th and the closing date to February 15th. When we didn't get approval back shortly before January 15th, our agent submitted another amendment to extend the date in the SS add. to Feb. 15th & closing Mar. 15th. We didn't get that one back from the seller signed but during that week received their lender's approval letter from the other agent on the short sale with closing on or before February 25th. The seller's agent is insisting on the Feb. 15th close date because they have a cash buyer waiting to buy this home also. Don't they have to honor the Feb. 25th date on their lender's approval letter?

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A short sale means the seller's Mortgage Lender is accepting a discounted payoff to release an existing mortgage (they are taking a loss). Just because a property is listed with short sale terms does not mean that Lender will accept your offer, even if the seller accepts the offer.

In some real estate markets, fewer than 1 in 10 short sales close. Just because that home is listed as a short sale doesn't mean it can close at the advertised price (because it's subject to seller's Mortgage Lender's approval). Some short sales are priced ridiculously low. So low that the sellers' Mortgage company will never accept them. To get your offer accepted, the offer will need to be priced near market value. The Mortgage company will evaluate the cost of foreclosing vs. taking a bird in hand now, they do a risk assessment on the property to see which may be the better outcome for them. That Mortgage company does NOT care about you the buyer!

Remember the Lender taking the financial loss here is going to want to know fairly accurately what the fair market value is for the property before they are going to agree to a price for it. That lender will typically get 2 appraisals and perhaps a BPO and then compare all that data to see what they are giving up if they sell now versus going through with the foreclosure.

Many Short Sales fail because the mortgage company is unfamiliar with the local market. Don’t expect a quick answer as they research the comparable home sales.
The lender may demand the seller to sign a promissory note to pay back the short sale. If the seller refuses, it may sour the deal.
The mortgage company does not want to own the property, if they can help it as the alternative is to foreclose it.

Make your offer contingent upon the lender's acceptance. Give the lender a time frame in which to respond.

Some lenders submit short sales to committee, but most can make a decision within two to three months. Typically the greater the loss the longer it can take as it goes through various reviews and committee meetings at the Mortgage company. This is a slow moving process, do not expect any fast responses or action from the seller's mortgage company, do not expect that you have any pull, you do not! Expect frustration, delays, unknowns and at the very end a final purchase price higher than what you had initially signed on for, that happens in over 90% of these sales when they actually do close.
2 votes Thank Flag Link Sun Feb 13, 2011
If you read the short sale addendum you will notice that it most likely says something like: "this contract is subject to review and acceptance of the Seller's lender". The Seller's lender (Mortgage holder) does not sign the contract thus there is no binding effect on the lender (Mortgage holder) to any particular contract even if it was signed by the seller. "Acceptance" by that lender is when they agree to the HUD 1 (Settlement statement) and a closing date, plain and simple on that score as I have never actually seen them sign anything other than the documents at the close of sale, nothing is signed prior to the close of sale. That is why typically you are not in a position to hold their feet to the fire for breech of contract. Everybody is at the mercy of the lender (Mortgage holder) that is taking the loss on the property, they hold all the aces in their hands. Sometimes the Title Company has more insight than anybody else into what is going on at the end of these transactions, so you might want to check with the Title officer to see what they can share with you. The Buyer's agent is not typically going to get any opportunity to discus the situation with the Mortgage holder.
2 votes Thank Flag Link Sun Feb 13, 2011
Faith,

Your post is very confusing on the dates and especially the Agents involved. i.e. "Your Agent" "The other Agent" and "The Sellers Agent" ???

If I follow you correctly, you do have a very unusual S/S situation. As Noone is normally ever complaining about a Closing Date which is TOO SOON on Sht. Sales!

As I said below, It depends upon your Contract. What does it Say? (all of it, every word...) and secondly, as Peter said, and I tried to convey, you are not in much of a leveraged position. The Bank owns all of the cards and you are really at their Mercy.

Too Many S/S's are exactly what Peter discribed.

If worse comes to worse, There are A LOT more houses out there at GREAT prices w/o all the S/S crud attached. Just don't be too greedy or you will be penalized with a Short Sale!
1 vote Thank Flag Link Sat Feb 12, 2011
I do my best to convince my buyers to stay away from short sales. After nearly 20 years as a Realtor and coming from a Corporate contract background prior to that, everything in me says these short sale contracts are not worth the paper they are written on. They are the worst kind of home purchase I can imagine. Those short sale contracts are worthless. Yes they have terms but the Lender taking the hit ultimately will decide what, where and when - contract or not. You basically have an unenforceable contract in most cases. You can threaten to go to court but then who are you going to sue for performance based on what words in the contract? Don't expect the seller to go to bat for you they are taking a loss themselves on these short sales and typically don't have any assets to go after. Really I wish you good luck on this one.
1 vote Thank Flag Link Sat Feb 12, 2011
Threads like this Are very helpful and can be a Great source of information for our Buyers who are pondering the Short Sale Jungle.

Short Sales at this point in time are a lot like the Wild West and can easily turn good Buyer Clients against good Buyer Agents. Informimg the Clients before hand and keeping them up to date and also keeping as much info. (Emails, etc..) saved in writing is the 1st line of defense against the Short Sale virus' that infect so many.... (people have very short memories sometimes...)

I thank Agents such as Peter Colt and others who have nothing to gain personally by freely giving their insight and S/S exp. here on trulia. Thankfully through Trulia, he and other Agents help to reinforce the Same kind of preliminary Short Sale pep talk that I work so Hard to try to convey to our Clients BEFORE making an offer...

Short Sales; -Not for the faint of Heart"...
0 votes Thank Flag Link Tue Feb 15, 2011
Considering that a Short Sale is totally contingent on the Mortgage Lender's approval, the contract is only binding to that extent. Ultimately the price, terms and closing date will all be at the descretion of that Lender.
0 votes Thank Flag Link Tue Feb 15, 2011
The lender gave approval of the short sale based on a closing date no later than the 25th. The seller has the ultimate decision on when they will close. Considering you dont have the signed ammendment pushing the closing back to March 15th, the sellers are only contractually tied to you and your offer until Feb. 15th. If it is not closed by then, then the sellers have a choice to either continue with your contract or try to find others. Since it seems like the seller is wanting to move on if you dont close by the 15th, I hope it all gets closed today and your able to get teh home you want.
Have a Blessed Day!
Chris
0 votes Thank Flag Link Tue Feb 15, 2011
Absolutely right, the lienholder/lender for the property is in control. This is a process that varies and requires a lot of patience. There isn't much you can do to push the process forward. With so many people involved it complicates the process and any one person could slow things down. Good luck.
0 votes Thank Flag Link Mon Feb 14, 2011
This is probably one of the MOST useful discussions ever posted on Trulia! Countless questions put forth by buyers are answered here. BRAVO to all the agents who answered this! YES, the lienholder/lender for the property is in control! And YES, the process can take a very long time necessitating many extensions of closing dates and there is no way for the buyer to pressure the lienholder into complying with their wishes on anything. If the buyers waiting will just have patience, they will likely close on the home if the selling agent is experienced and knows what he/she is doing. One other point not made is about the buyer's lender. A buyer should choose a lender that has short sale experience and knows and understands that the process can take a long time. There are buyers lenders out there that do not understand this and can really hurt a buyer's chances of getting the home of their dreams by advising the buyer that they have some sort of "power" over the lienholder who controls the property and advising them that they can strong-arm the selling agent and/or the buyer's agent into getting a written approval from the bank/lienholder and closing on the buyer's terms. This just will not happen and they will be very disappointed if they are advised poorly on this issue. For all of us agents, this really comes under the heading of Managing the Buyers Expectations and it's a very important responsibility.
Thanks for a great discussion!
0 votes Thank Flag Link Mon Feb 14, 2011
I am not sure how your short sale will work out, but rather than trying to predict a date your agent should have specified a time period ( 30, 35, 40 days etc.) after bank acceptance. This way no matter what day your contract becomes effective it would always be X number of days after,
0 votes Thank Flag Link Sun Feb 13, 2011
Who decides the closing date --- well, it depends on the short sale lender approval. The approval will generally state by which date the sale must close escrow, or the approval is rescinded.

Just to have a little more breathing room, I usually try to close a few days before the deadlne because nothing is final until the short sale lender provides final approval of the HUD (closing statement).

Also note that although agents on either side may request an extension, and even if both buyer and seller agrees to the extension, it isn't a done deal unless the short sale negotiator agrees to the extension. Without an approved extension, you should go only by what is stated on the short sale approval as the date the sle should close.

Good luck!
0 votes Thank Flag Link Sun Feb 13, 2011
Faith........3 parties...the buyer, the seller, and the lender. That's who matter most. Realtors for the buyer and seller may also have some input or advice for their clients.
I don't follow the dates exactly here.......
It may depend on if you are using financing or cash. If you got approval in mid January for Feb 25th closing and that is what is signed....sounds like you have the good workings of a contract no matter what the other realtor wants to happen.
My buyer advice to the seller's realtor would be to honor the contract as written and if she wants to negotiate, she needs to do that with the cash buyer and convince them to wait until Feb 26th on a decision as to what to do with this property if it is still available on that date.
In most cases I see if the SS addendum says the 25th...that's the day your lender, the title company, and the ss lender are shooting for at this point.
The other advice I would give my client in this situation is to do everything you can with your lender to ensure it closes on time or a day or two early so that there is no chance I loose the house to a contract breech if it is not closed on time. I'd be in constant contact with the title company and the lender to ensure everything is on track daily for an on time close.

Good luck.......what's your realtor saying?
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Sat Feb 12, 2011
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
The date is always up in the air and decided by the bank . Sorry I have no great news. They do not move fast.
0 votes Thank Flag Link Sat Feb 12, 2011
These short sales are just a craps shot, might as well go to Las Vegas and through the dice. I have yet to have a client seller or buyer say to me how much they appreciate all the HARD WORK it took and then at the end to have the bank cut the commission down by 25% or more, it's just hard to justify why any agent with any sense would want to get involved with this kind of mess. After you pay everybody in the food chain you end up with little for all the hard work. Sometimes the seller is so upset they leave the place filthy and make no effort to keep anything up so by the time you close the deal there are repairs you had not anticipated, etc, etc. I say let the bank foreclose it, you probably will get a better deal after it's foreclosed. Nobody comes out feeling like a winner on these deals.
0 votes Thank Flag Link Sat Feb 12, 2011
WELCOME to the world of banks being involved

SIMPLE answer NO

What professional Realtors deal with daily ... MAKES no sense however lenders have soooo many files and overwhelmed you are only a mere number in the line up.

We instruct our clients NOT be packed have to move dates do change ;)

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Sat Feb 12, 2011
Yep, Pete has rolled it up in a big ball and..........there you have it! If you want the home plan on being the bank's pawn and one kept in the dark most of the way....

Bill
0 votes Thank Flag Link Sat Feb 12, 2011
The short answer may be yes. But, as Anna pointed out, it really depends on what is actually conveyed in the contract.

Short sales are a Dog eat Dog deal sometimes. (usually very FRUSTRATING at the very least!) With many entities in distress. As one Agent so eloquently put it in another post about short sales: you the Buyer, are at the bottom of the food chain, make sure you have someone properly looking out for YOUR BEST INTERESTS...

Good Luck to you!
0 votes Thank Flag Link Sat Feb 12, 2011
You first have to have the short sale approval and then you should have a date for closing. The lender is the one who is in control of this process since they are the ones in charge of approving the short sale. I have seen it take 6 months to get an approval and and then closing within 30 to 45 days. The term short sale is a misnomer since they are not usually short because of the approval process. Each lender is different and each have their own criteria for approving a short sale. Your lender should be able to explain the process to you and give you some idea how the process the approval and hopefully a time frame. However, without the approval nothing moves toward a closing. Thank you for allowing the realtor community to assist you.
0 votes Thank Flag Link Sat Feb 12, 2011
Much will depend on your contract, therefore review the document--also consider consulting with an attorney who specializes in real estate, have all related documentation reviewed and see exactly what options you may have--accurate advice prevents any future problems.
0 votes Thank Flag Link Sat Feb 12, 2011
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