Short Sale going into month #8. Anyone see any red flags here?

Asked by Elizabeth Miller, Sarasota, FL Thu Oct 25, 2012

First offer 3/24/2012. BPO done. Bank wanted more. Offered $10K more on 5/5. Bank verbally agreed. New BPO on 9/12. Bank wanted more. Offered another $10K. Bank verbally agreed. No written approval yet. Does anyone see any red flags here?

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Ron Thomas’ answer
Ron Thomas, Agent, Fresno, CA
Thu Oct 25, 2012
I can see a RED FLAG the size of the State of Georgia!

I have never, ever heard of a Bank giving a VERBAL anything!!!

Banks do business with paper.
A verbal agreement is not worth the paper it isn't printed on.
Whomever told you this should be relied on.

Actually, it starts there, and it ends there: After 8 months, you have nothing in writing.

Good luck and may God bless
1 vote
Kari Battagl…, Agent, Venice, FL
Tue Dec 18, 2012
Hello Elizabeth,

All banks work at different speeds unforetunately which is frustrating for all involved. In the past I have gotten short sale approvals within 45 days and then I had one close after 1 year. Some banks are just notorious for slow processing times. Investors (those who actually own the note) have different requirments for expirations on documents and BPOs (Broker Price Opinion) and should the file have no movement then seller will have to submit updated documents and new BPO's ordered (generally BPO's are good for 90 days). In Venice Florida real estate market properties are appreciating in value which could be reason the "investor" would be requiring more money after a BPO has been completed. All lenders have a required percentage to market value they will accept. Most lenders will not disclose BPO valuation. In my experience all banks counter verbally with the buyer and then the buyer has the right to accept or make their own counter. The only thing you will ever get in writing from a lender (in Florida) is the short sale settlement letter or short sale approval.

I would ask your realtor to request they escalate the file or contact the office of the vice president of that bank for help as your file seems to be sitting with no movement. Good luck.
0 votes
Alma Kee, Agent, Tampa, FL
Sat Oct 27, 2012
Possibly a red flag.

Questions your Realtor may want to ask the Seller's Realtor:

Who is the "servicer" for the first mortgage? Who is the actual investor that owns the 1st mortgage?
If Fannie Mae, then this should have already been approved at least once at this point.

Is there a 2nd mortgage? Who is the servicer and who is the investor that actually owns the 2nd?

Is the property occupied by the owner? Is there a tenant living there? Even if the property was vacant, you should go back to inspect to see if a tenant is now living there with destructive pets and if any mold has accumulated or vandalism. You may want to cancel if the property is no longer a "bargain" due to the condition.

If the property is jointly owned, are both spouses cooperating and sending in their bank statements, paystubs every 3 months?

Is the first or second lender requiring the seller to agree to repay all or part of the loss? Is a promissory note required to be signed by the Seller?

If in an HOA or Condo assn is the property now in foreclosure proceedings or is the owner current on the HOA/Condo fees? An HOA or Condo can actually foreclose and take ownership and then rent it out. The first mortgage sticks to the property but it can throw a monkey wrench into the short sale.

The bottom line is until/if you get an approval letter in your hands at a price you are willing to pay, you MUST continue to SHOP for a home. Most short sale contracts allow you to cancel up to 7 days AFTER you receive your approval letter in your hands so you probably can cancel (even if you have to wait a month). For this reason, it's crucial not to deposit a large escrow check upfront on a short sale. I have heard of situations where an unethical (former Realtor) owner refused to release a buyer's escrow deposit unless he was given $500 when the buyer was well within his rights to cancel.

Good luck and remember, keep looking because this may not ever close and right now we are experiencing price increases so you may miss out on these bargains and end up paying 20% more because of the current investor demand on properties in Florida.

All the best,
0 votes
Tammy Hayes, Agent, Port Charlotte, FL
Thu Oct 25, 2012
I have had a lender do the same thing and my buyers finally walked after waiting almost a year. And they did give my buyers a verbal dollar amount but we never saw anything in writing from the lender because they never officially gave the seller an approval of short sale letter. My buyers kept extending the closing date. That short sale home is still on the market as Pending because it had a back up offer. Every time I look at it the date is extended. It is going on year 2 now.

If the person that is handling your short sale cannot get the approval by now, there is something wrong. The lender may be trying to get more money from the seller or is asking the seller to sign a promissory note and they cannot come to agreement. There could be several factors that are coming into play. If you can't get an answer and you don't want to keep waiting and hoping, it is time to move on. If you have time to wait and this is the house for you, it could be worth the wait.

Best of luck to you. Short sales can be very frustrating at times. There are so many different variables.

Tammy Hayes, Realtor
Green Lion Realty
0 votes
Werner Untri…, Agent, Sarasota, FL
Thu Oct 25, 2012
Dear Elizabeth, I had short sales take up to a year. I am working on one right now for seven month. No there is now red flag at all. Some banks are still working very slow. Your agent should push the listing agent a little bit. If you still like the property you made an offer on, just hang in there.

Kind Regards

Werner Untrieser
Broker Asssociate, CRS, CIPS, GRI, TRC, SFR
0 votes
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