We have a bank approval on a short sale, signed purchase agreement, & deposit was sent to escrow. Now the bank offered a loan mod to the seller.

Asked by Luny2ni, 91601 Thu Aug 19, 2010

WTH?? Can they do this?

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Kieran Jackson’s answer
Kieran Jacks…, Agent, West Hollywood, CA
Wed Jun 6, 2012
Seems like a really old post...

The bank approved the short sale. The seller and buyer have accepted an offer and ratified a contract... It doesn't seem like the bank can UNDO that by offering a loan modification.

I wonder exactly how did this situation pan out?

All the best,
Kieran Jackson, CA DRE #01903647
Keller Williams Hollywood Hills
Web Reference:  http://KieranTheRealtor.com
0 votes
Ted Zervouda…, Agent, Huntington Beach, CA
Mon May 21, 2012
Here is what the California Association or Realtors Short Sale Addendum form states in section 4 of the form:

“NO ASSURANCE OF LENDER APPROVAL. Buyer and seller understand that Short Sale Lenders: (i) are not obligated to give consent to a short sale; (ii) may require Seller to forward any other offer received; and (iii)may give consent to other offers. Additionally, Short Sale Lenders may require that, in order to obtain their approval for a short sale, some terms of the Agreement, such as the Close of Escrow, be amended or that Seller sign a personal note or some other obligation for all or a portion of the amount of the secured debt reduction. Buyer and Seller do not have to agree to any of Short Sale Lenders’ proposed terms. Buyer, Seller and Brokers do not have control over whether Short Sale Lenders will consent to a short sale, or control over any act, omission, or decision by any Short Sale Lender in the short sale process.”

This setatement may be of interest to you: "Buyer, Seller and Brokers do not have control over whether Short Sale Lenders will consent to a short sale, or control over any act, omission, or decision by any Short Sale Lender in the short sale process.”

Check to see if you signed this form as it should be a required form on the short sale process.
0 votes
Luny2ni, Home Buyer, 91601
Fri Aug 20, 2010
Apparently the seller has applied for a loan mod before and was denied. The bank re-offered a loan mod again and she wants to re-apply again after the purchase agreement was signed.
The seller is also a licensed real estate agent! She is not the listing agent. I mean, I don't want to kick her out of her home nor could I but it just doesn't seem fair.
Why is it the buyer can be penalized if they want to withdraw from the sale but the if the seller does there is no recourse for them?
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Keith Sorem, Agent, Glendale, CA
Thu Aug 19, 2010
Did the seller ask for a loan mod, was turned down, and now, faced with reality....they reconsider>?
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Linda S. Cef…, Agent, Franklin, WI
Thu Aug 19, 2010

This could be because the two entities are not in communication with each other. Unfortunately, in many cases the department responsible for making the decision on loan modification is not on the same page as the department responsible for foreclosure, short sale etc.

This is creating problems for sellers and buyers, but my understanding is they are working on it!!

I am so sorry that you have to go through this, but I would take the advice of previous posts and call your attorney if you cannot get a satisfactory answer via your agent - assuming you have an agent. If you don't, then I would call at attorney asap.

Web Reference:  http://www.lindacefalu.com
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Emily Knell, Agent, Huntington Beach, CA
Thu Aug 19, 2010
Is the seller considering the offered loan mod? Banks will do anything possible to try to get the homeowner to stay in the home & grossly overpay for the house. Important for you to know how much negative equity does the homeowner have? How much do they owe right now vs. what the home is worth? Even if the bank gave them a 2% interest rate over the next 5yrs, oftentimes it still doesn't make sense for the homeowner to take it the deal.

It does sound like the bank should be held to some accountability, just like an owner who accepts an offer on a traditional sale, can't just back out or change terms without agreement or penalty, I think the this particular bank, provided that you DO actually have that Short Sale Approval letter IN YOUR HANDS, should be forced to continue with the short sale because they already approved it.

Now would be a good time to run this by a Real Estate attorney & have them write a letter & have the listing agent turn it over to the negotiator they're working with at the bank right quick!

In the meantime, do find out about how much neg. equity the seller has, Make SURE they're not leaning towards loan mod & if you have to, do the math with your agent, show the seller the cons about not doing a short sale now, 12/31/2012 is when the Mortgage Debt Forgiveness Act expires. If the seller takes a modified payment for 3-5yrs & then goes to sell in 5yrs or less they'll be hit with a tax bill approx. (18-24% X that neg. amt. in IRS income tax payment)

562-430-3053 cell
0 votes
Monique and…, Agent, Beverly Hills, CA
Thu Aug 19, 2010
Hello Luny2nl,

If the seller accepted your offer and the bank approved the short sale how did they also offer a loan mod? Something smells fishy.

Monique Carrabba
The Carrabba Group
Keller Williams Holllywood Hills
(323) 899-2900
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