We've been working a Bank of America short sale for nearly a year now. Offers continue to be rejected when we get down close to approval.
Currently, we have a cash offer and the seller has agreed to a $16,500 promissory note. Terms were agreed upon in Equator, and we were expecting an approval letter.
Received a phone call from the negotiator on the other side who was incredibly apologetic.. stated that she had been fighting with the MI company as they suddenly rejected our offer and countered back $10,000 higher. The buyer is unwilling to match, and is completely justified in refusing. The property is not worth the $70,000 the bank is asking.. we have provided numerous comparables justifying the $60,000 purchase price.
This unit is a 2/1 built in the 70's. There are multiple 3/2's with more living area, much newer, that have sold or sold for +/- $2,000 of our $60,000 purchase price.
It seems that the MI company simply does not want to deal. We have been given a firm "accept the $70,000 offer or it will be declined", and are now stuck as to where to go from here. Is there a way to get the MI to deal? This just seems bizarre.. Bank of America's negotiator has been incredibly apologetic since the MI company's last-second rejection and counter offer, but obviously that does not help us out.
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Eric, that's one heck of a good story; congratulations on good work!
I think they are much smarter than us.
Another option is to offer $5,000 (or $7,500?) more in note payable, 10-years, 0%, in the negotiating strategy of giving the PMI negotiator a bone.
That said, I really liked comments in this thread by Michael Schneider and Erik Larson.
My first question is, What is the deficiency liability of the mortgage? Here in AZ, most first mortgages are non recourse. If the attorney you are working with did an analysis when this started, did the attorney make that determination? The reason is, the MI company only has those rights that the first mortgage had. If the MI company seeks to enjoy greater rights, then you may have a First Party Bad Faith claim. If the mortgage company could not sue for deficiency then the MI company cannot either. Once you find out who the MI company is, and we use the method of calling the CSR departments at the MI company and do an address lookup. Works every time. Then you just send them a letter that you believe what they are doing amounts to First Party Bad Faith and are going to file with the State Insurance commission, and they go away very quickly. Works for prom notes and cash contribution demands from MI as well.
Good tip! Thanks for sharing.
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if the investor calculates that they can make more by foreclosing, sometimes they simply will not approve the short sale. It's a fact of life but fortunately it's rare. Escalate but understand that sometimes they do not want the deal at any price.
Probably, your target should be the Investor, more than the Insurer. And, the Investor probably isn't BofA.
In my view, these are fights between the Investor and the Insurer. The Insurer controls, and they may be better off under the foreclosure. If so, they have no incentive to deal. By contrast, the Investor is getting a partial payment from the Insurer, after the sale. The Investor is probably better off under the sale than the foreclosure.
Hence, the Investor is more likely to have the incentive to accommodate. You may need the Investor to agree to reduce their claim on the Insurer, in return for completing the transaction, thereby getting money to the Insurer.
Not saying I know how you get there...that is the tough part, I think.
I agree. Chances are the investor doesn't even know this is going on. With Fannie & Freddie I have had success getting them involved and negotiating directly with the MI company for a claim reduction.
I would work 2 angles:
1) Escalate to everyone. BofA Twitter Help, the investor and try to get the MI company info and work with them if you can.
2) Have the seller re-write the hardship letter. These scenarios have much more to do with the perceived borrower financial strength than the property.
I hope this helps - good luck!
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