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.
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!
The Marie Souza Team - Top Selling on Cape Cod
Cape Cod Real Estate Services
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 possible...so if the lender offers them a loan mod, I hope you've kept some back up homes under consideration.
Odds for the loan modification being granted half-way through are often slim. Odds are probably far greater that it will eventually go to foreclosure than become available again as a short sale. A reason for that is sometimes, sellers feel embarrassed to call back an agent after the loan mod goes south. Sometimes, sellers feel too beat up by the loan mod procedure itself, and they don't have any strength left within themselves after all of that crap to pursue a short sale, so they give up and walk away.
But whatever you decide to do should be based upon what your agent tells you. That's why you have an agent -- to give you advice that you can rely upon.
Lyon Real Estate
Sacramento Short Sale Agent
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.
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.
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.
Please see my blog for tips on how to buy a short sale