My wife and I are trying to purchase a home that is very near and dear to us which is currently in a short sale/foreclosure status.
I am frustrated beyond belief with this and in searching for answers on the net; I came across this site which seems to have an abundance of helpful, knowledgeable contributors. I can’t seem to find an answer to my specific situation anywhere and I can’t seem to get my foot in the door with B of A at all.
Here’s the background on the property. It was my childhood home; I lived there for close to 20 years. On the property is a log home that my father and I built, cut the logs, hauled them, we literally built it entirely from the ground up. 3 of my 4 children took their first steps in this home as well, there are not a lot of memories that this place is not a part of. I could go on and on as to why my wife and I want to purchase it, but I’m sure you get the picture.
About 5 or 6 years ago (height of the market), my parents divorced and were forced to sell the property. At that time, home prices were outrageous and there was no way I could afford it.
My father was paid off, my mother held a second on the property, balloon payment in 5 years. In the meantime, the buyer also mortgaged a 1st on the property, held by B of A.
Fast forward to last year, the buyer stated that he could not pay my mother and also quit paying the 1st, which sent the property into the foreclosure/short sale status it’s in now. The property will now not appraise for what is owed on the 1st or the 2nd, not even close.
We all realize that if B of A forecloses, the junior lien holder will not get a dime. I do not want to go into this portion, my mother is pursuing other means of recouping her losses, and her purchasing the property is not an option. She is not concerned about getting any amount of payment to release her second, but only if it’s sold to my wife and I.
Once the property was listed, my wife and I made an offer that was above the asking price. It was eventually accepted by the seller, and forwarded to the bank. We disclosed the relationship between the junior lien holder and myself at that time, even submitting a document from my mother that agreed to a very minimal payoff for her to release the second.
B of A eventually came back and denied the offer, stating that this was not an “Arm’s Length” transaction.
Before we even made the offer, we spoke to a real estate attorney to make sure what we were attempting was legal. They advised us that this in fact was an “arm’s length” transaction and well within our rights.
I know everyone is going to tell me that my agent and the selling agent should be dealing with this. I agree. The problem is it’s not going anywhere and I don’t think we have any choice but to find a solution ourselves.
The only information I can get from the selling agent, is that my mother has to completely release her 2nd, which would open this sale up to everyone. I want to avoid that if possible.
My questions are 1) Do you feel this is or isn’t an arms length transaction, 2) what can we do to make this work?
Thanks in advance for any advice or direction.
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I received the official denial letter today from B of A. This is what it states.
1. On 11/22/12, Richard Jenkins signed a Short Sale Purchase Contract addendum regarding the subject property which reflected that he had no relationship to the property seller.
2. Public records reflect that a family member of Mr. Jenkins is the beneficiary of a Deed of Trust on the subject property.
Does holding a 2nd deed of trust make you the seller??
Wow, that is frustrating to say the least. The problem with major lenders like B of A is that once they make a decision and stamp it in the file, it is almost impossible to make them to change their position. Every short sale regardless of lender requires the "arms-length transaction" certification to be signed. I was under the impression that this was strictly arms-length between buyer and seller, but I could see why the lender would expand it to include other lien holders.
Here's another option. You could find a wholesaler to purchase the property and do a double close. The wholesaler submits the offer, gets the bank approval, buys the property and then immediately sells it to you. You would pay a little over the purchase price to cover the wholesaler's time and effort. It can be a little complicated, but an experienced wholesaler should know how to handle it.
The other option, and easier one, is to wait until the auction and just hope and pray that no one else makes a short sale offer on the property.
Simon Campbell - http://www.bankforeclosuressale.com
Thanks...I'm sure our lender would be willing to do something like this. I am just concerned that it would also be considered a non arms length, because of the obvious negotiations that would occur prior to. I've heard that if they wait a year to sell it to us (us renting it from them in the mean time) that it would meet the arms length criteria. Does anyone know if this is true? I do not want to do anything illegal here and I definately wouldn't ask anyone else to either.
I've seen Servicer's/Investor's make exceptions to arm's length transactions before. Even on a Freddie Mac owned Loan. It's however not the rule.
Short sale lenders often require an Affidavit of Arms Length Transaction to be signed by all parties to the short sale transaction including the listing broker and the selling broker. Any misrepresentation may be construed as mortgage fraud.
If B of A has postponed the sale you could have your attorney contact B of A or the underlying investor directly and offer to buy the note at a significant discount. Once you own the note, you can foreclose or offer the borrower some incentive for a deed in lieu of foreclosure.
Since your mother is not buying the note and will not occupy the property and will receive no financial gain from the transaction this may be an alternative. Consult an experienced real estate attorney before proceeding with this strategy.
I briefly talked to my attorney this morning and this is what she suggested as well. Still trying to get clarification as to why the attorney felt this was an arms length, why BofA does not agree, and what went wrong in between.
Definitely NOT an arms length transaction. As a Broker, I wouldn't have even considered this. Regardless of what the attorney says, or even tries to argue with the bank, they have made up their mind and I hate to say, yeah... I agree with them on that one point. Not an Amrs Length.
The only information I can get from the selling agent, is that my mother has to completely release her 2nd, which would open this sale up to everyone. I want to avoid that if possible.
Im just throwing ideas out to the group. Why doesnt your Mom (attorney) write an approval to release for $0.00 for ONLY your transaction. She can put the standard " any changes to this offer or buyer will have to be approved by Mom" She can then decide to say yes or no to other buyers. Hopefully, the selling agent is shopping an you are the only offer at the bank. Is the home showing as under contract or still available?
Anyway just an idea
This is pretty much what we did. The sellers agent had us draft 2 letters to submit with our offer. The first was to state that my mother would not accept any offers other than mine. The second letter stated that she would sign off for $2500. Again, the SELLING agent asked us to draft both of these letters. I thought his was odd.
In the beginning, our attorney told us this is how it would go down. We and whoever else would make an offer. After the seller approves one, it goes to the bank. They agree on a selling price (if not the original offer price), then the bank contacts the junior lien holder (my mother) to settle with them. The junior lien holder then has the right to accept or deny any offer for any reason.
I just checked their site, the property is not even listed any more.
My mother would be willing to sign off for $0 dollars, no problem, if that would work.
Hi Rich:
Important question.....who is the first and how much is the balance on the 2nd to BOA? Also, do you have to short the first within the sale?
Bert Gor
The Short Sale Group, Inc.
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