Robin, Other/Just Looking in 92646

**I'm the buyer** What is a loan modification and can this be done on a home that's listed as a short sale?

Asked by Robin, 92646 Wed Nov 30, 2011

I've placed an offer on a short sale home and the selling agent was just informed by the sellers that they have been trying to get a loan modification for a few months- much like Elizabeth Weintraubs scenario. Will I be able to purchase this place eventually? The sellers haven't signed the docs yet.

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Hi Robin,

I have experienced this scenario a few times with seller's after they listed with me to sell their home. In some cases when a seller contacts an agent to sell they have already tried and failed at the loan modification option. What I have found is that some banks will contact the seller after the home is on the market and ask them if they want to pursue a loan modification instead of selling. If the seller feels that a loan mod is a workable solution, they may continue working with the bank to see if they can agree on some terms.

If the loan mod does not workout, because not everyone will qualify, the bank will either suggest that the seller continue with the short sale, or there we be an eventual foreclosure. Will you be able to purchase this home? It's hard to tell at this point because the seller's are more interested in negotiating keeping the home than selling it. Your only hope would be that the bank denies the loan mod and the seller continues with the short sale.
0 votes Thank Flag Link Wed Nov 30, 2011
A loan modification is where an owner of a house asks the bank to modify their loan. This is usually because they are behind in payments or their payments are adjusting. It is my understanding that a loan modification and a short sale can not be done at the same time. This does not mean that people are not doing this. The loan mod department and the short sale department are two different departments and they do not talk to each other.

My suggestion would be to talk to your realtor and have them talk to the listing agent. The sellers need to decide if they are going to try to modify the payment and stay in the home or sell the home. Good luck!
0 votes Thank Flag Link Wed Nov 30, 2011
Robin, The sellers either want to keep the house (possible loan mod) or sell the house (possible short sale). Which is it? This is more a question for your agent to ask the listing agent. It may just be that the sellers will do whatever comes first.
The Marie Souza Team - Top Selling on Cape Cod
Cape Cod Real Estate Services
0 votes Thank Flag Link Wed Nov 30, 2011
No, loan mode. Are for the current owner. When you buy you will either take out a new loan or assume the sellers loan. That us very rare though.
If you need a great loan officer call Glenn Olsson at 916-276-6236
0 votes Thank Flag Link Wed Nov 30, 2011
Whenever you're looking at buying a short sale home, your buyer's agent should do an assessment of the circumstances of the short sale to help you predict the likelihood of it going to closing.That assessment should be a general understanding that the seller is in a hardship situation, that the seller has already evaluated and determined that a loan mod would not work for him and then that the listing agent has a track record of successfully closing/negotiating short sales.

While there's never a guarantee, this should increase your odds. A good short sale listing agent will ensure that the seller has thoroughly worked through the option of a loan mod before short saling the home. Personally, I would never want a homeowner coming back with regrets of selling their home, and thinking that they wished that they'd tried a loan mod. The sentiment in the market is to try to retain homeownership for as many people as if the lender offers them a loan mod, I hope you've kept some back up homes under consideration.
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0 votes Thank Flag Link Wed Nov 30, 2011
Hi Robin,

A loan modification is where the seller attemps to get their lender to modify the terms of the exsisting loan so they can keep their home & yes sometimes they are doing that while short selling. Most loan modifications do not go through, but some do, so you are right to have concerns about your purchase. Speak with your agent and their broker to get their advice since only they know the terms of your deal and can tell you what your options are.
0 votes Thank Flag Link Wed Nov 30, 2011
As long as the home is in a loan mod workout status, it is likely that the lender is not acknowledging the short sale. Sounds like you need to have your agent get some more direct answers from the listing agent.

A homeowner who is pursuing a loan mod and a short sale, in my experience, is still hoping to save their home. This seller sounds like they are not committed to selling. Unfortunately in this instance, there is no kinda-in, kinda-out. Either they are in, or they are not. That's part of the reason why lenders only allow them to pursue one workout program at a time.

If the seller is committed to selling, why are they pursuing a loan mod? You, as the buyer, need to know that the seller is committed totally to selling.

0 votes Thank Flag Link Wed Nov 30, 2011
Hi Robin,
Thanks for the clarity! I would still recommend that you check with your Realtor. I am not an attorney and offer no credible legal advise. If you hold an agreement with the seller that they will sell you the home, it's possible that the seller is in breach of contract if they get a modification and do not complete the sale. Your Realtor may ask you to consult an attorney. It's possible the lien holder told them to try for a modification before they will okay the short sale. And short sales going thru rely on the lien holder's ok.
Lastly, alot of modifications don't get okay'd or payments won't work for the seller, so they may just go thru with the short sale.
Hope that helps.
0 votes Thank Flag Link Wed Nov 30, 2011
Robin it is common for an owner to try for a loan modification to keep their house, most do pnic and list their house as a short sale to try and stay out foreclosure. If they get a loan mod, chances are they are not selling. The way the short sale process works is first teh seller accepts an offer, signs it and then it is submitted to the bank for approval.…

Please see my blog for tips on how to buy a short sale
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0 votes Thank Flag Link Wed Nov 30, 2011
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