Home Buying in Vancouver>Question Details

Carrie, Home Buyer in 98682

What truly constitutes a short sale approval?

Asked by Carrie, 98682 Sat Apr 5, 2008

We made an offer on a short-sale home, which was counter-offered by the bank, and we accepted the counter-offer and then had to proceed with appraisal and home inspection (fees we incurred). Closing date is listed as "subject to short sale approval". Now banks has learned of a $7500 signature note of some type, that sellers and bank that both refuse to pay. Can we back out and request the bank to reimburse us for all fees? Had we known about this issue prior to scheduluing appraisal and home insepection, we would not have gone through with the counter offer.

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7
Please read below regarding one of my friend's who has two sisters' working for Washington Mutual.

Be careful these companies could careless in some instances..........

Another anecdote for the soup:

My sisters' are service managers for WaMu's debt collections joint out in Santa Clarita and they both tell me that WaMU is still in the process of a huge ramp-up in response to the avalanche of people unable to pay their mortgages on-time.

BUT they are hiring more debt collectors in order to help facilitate the lengthening of the average foreclosure process.

When troubled borrowers are tapped out and their late mortgage payments start turning into no mortage payments, collectors hit them will all the possible options, of course, - refis, loan mods, post-dated checks - anything to get that promise to pay. But when borrowers say they STILL can't pay, agents transfer them immediately to the "loss mitigation" department that pushes them towards the short-sales option.

Nothing worng with that, per se, but it's interesting to note that once a short sale process is started, that same department, understaffed and usually unwilling to accept real losses on the property, can offer little real help to the borrower, though all together it can add months to the foreclosure process. At this point, my sisters' say, the loss mitigation department it's just another internal mechanism to forestalling and prolonging the inevitable foreclosure process as WaMu is incapable and unwilling to process large numbers of foreclosure.

And so they do what their bosses want them to do. And they stem the tide.
1 vote Thank Flag Link Thu Apr 24, 2008
First of all, in most cases, the short sale is approved prior to the contract being submitted. If the bank has countered you and you agreed upon a purchase price and it was signed by all parties, then you have a contract to close. However, and I mean, however, things pop up on title just before closing and one of the items that should have been discussed with you is that you should be aware that if there is an outstanding lien, that lien needs to be handled either by the buyer, the buyer and the seller, the seller, etc. This note could have been negotiated but the bank will not pay for it.

I had a buyer who was purchasing a two flat and I had explained to him the possibility of a lien being filed at the last minute to see if they could get any monies from the seller or the buyer for said lien. The lien was for $40,000! The seller's attorney knew about it but thought that because the lien was on the seller's name but not the property, it wouldn't hold. It did! So, what I did was talk to the title company, asked them to renegotiate their fees, the other agent put in some money, but I put out a good portion of my commission to make the deal work. The lienholder had five minutes before the property would be put into foreclosure. I told him either accept it or get nothing in six minutes! He took the money and released the lien. We closed.

If the lien was on the title and I, myself, as a Realtor, pull up title on behalf of my clients to make sure that there aren't any wild liens that could effect the deal and then he would be wasting money. I mean, I check the water, the gas, the electric, to see if there are any code violations prior to agreeing to a final price for my clients. These are things that should have been done.

The Bank will not reimburse your fees. Remember they are taking a loss as well. These are some of the risks involved in buying a short sale. However, if you are represented by an attorney who knows short sales, a Realtor who does short sales day in and day out, and you go in with knowledge, you stand a good chance of closing and not loosing.

Barb Van
Keller Williams Lincoln Square
Chicago, IL
0 votes Thank Flag Link Wed Oct 14, 2009
It depends on that you agreed to in your contract. Call your Realtor , I am hoping you have a Realtor working with you on this. When in doubt call your Real Estate lawyer also.
0 votes Thank Flag Link Wed Apr 23, 2008
A letter stating this from the bank
0 votes Thank Flag Link Tue Apr 22, 2008
The bank will issue in writing acceptance of the short sale with any conditions, usually giving you 7-10 days to close. Inspections and appraisal must be completed quickly and close on time...
0 votes Thank Flag Link Tue Apr 22, 2008
Unfortunately, there are just no guarantees until close with both short sales and foreclosures. Even a foreclosure can go almost to close and then have a title issue pop up. I have never seen the banks reimburse for a buyer's inspection in this case, either, unfortunately.

You can get a great deal with both short sales and foreclosures, but there is greater risk as far as your up front costs go.

I am sorry - wish I had better news for you as far as getting those costs back. I have been able to do it in one case when I literally had to submit a bill to accounts payable in the REO department, but it was touch and go on that one. Make sure also that there is a 22k filled out so that escrow is responsible for getting those final bills on the house paid before the ownership transfers to you.

Good luck!
0 votes Thank Flag Link Sat Apr 5, 2008
Carrie,
This is a great question. One that's answer can vary from one bank to the other. In most cases however a final approval won't happen until the bank has reviewed all the documents. This in most cases is right up to the closing. I have recommended that buyers understand that there is little control for them in this situation. You can back out of the transaction, but only if you have a real reason too(I don't want to advise you on this because I don't know how your contract is written) Several things can happen.
1. The bank may absorb the $7,500 loss in addition to the loss it is incurring because of the short sale.
2. The bank may ask you to pay this amount.
Again because I don't know the market value/appraised value. I am not sure how this would really work itself out.
One think I know for certain. The bank is not obligated to pay your fees for appraisals or inspections. This is just one of the hazards of purchasing a home in "pre-foreclosure."
0 votes Thank Flag Link Sat Apr 5, 2008
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