Replies to This Discussion

Permalink Reply by Sandra Allen on August 9, 2011 at 11:55pm

Don't be baffled.  Just qualify her as you would any buyer.  She may not know what she is doing.  Just because she is trying to pursue a short sale for her current residence doesn't mean she will get it approved.  I've worked with a couple where one spouse was going through a short sale and they purchased a new home less than a mile away.  Only one was on the mortgage.  By the way, a year later the 2nd home owned soley by the husband foreclosed.  In any case, if she qualifies to purchase a home in your state, find her a home!

 

Good luck to you!

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Permalink Reply by Richard on August 10, 2011 at 12:11am

Coleen,

 

I just had a converstion with a homeowner/broker who is putting her home up for short sale next weekend.  The For Sale sign is already in place.  She gave me all the details I needed today in conversation.  But originally, I talked to the husband yesterday and he informed me that they are walking away from it.  It's a very nice home.  However, they are a month away from having another home completely built less than 5 miles away. 

 

They have a 1st, 2nd, and MI on it with B of A.  The short sale package hasn't been prepared or filed yet but, she feels very confident that she's going to be able to short sale it.  According to her timeline, the short sale home will be ready to take possesion in mid-October.  She's already lined up a negotiator.  This is all in the same state.

 

Hmmmm........but what do I know?

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Permalink Reply by Brian Avery on August 10, 2011 at 12:55am

I would walk away. The Buy and bail strategy is going to bite some people in the ass down the road. I personally will not touch any of these type of files. The person trying to short sale their property is committing fruad by not disclosing all material facts. It is not a matter of ethics , but who wants to maybe lose a license because they looked the other way.

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Permalink Reply by Jeff Payne on August 10, 2011 at 9:03am

I think that you are assuming too much.  Don't assume that she has a hardship and don't assume that her credit is bad.  She could be a strategic defaulter or she could have a transfer that forces her to move.   Maybe her short sale is such that she is willing to sign a promissory note or bring cash to the tabel to satisfy it.

Sell her a home, if she qualifies, why do you care what she is doing with her current home?

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Permalink Reply by Richard on August 10, 2011 at 12:59pm

That's a good point Jeff.  Transfers do happen.  Less than 2 football fields from the example I mentioned above is an absolutely gorgeous well maintained high-end home that I wanted.  It was forced into a sale because of a transfer.  As much pride as I had witnessed from the homeowner over the years, it would seem to be a rarity to see him bail.  It was confirmed to me by the agent that it was a transfer.

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Permalink Reply by Brian Avery on August 11, 2011 at 12:16am

Here is the issue. Every lender will look at the current home you occupy and pull comps. If they see it is upside down they will request a "Letter of explanation" as to what you are intending to do with the property. If you state short sale, bail, run etc your new loan on a new purchase will be denied. If you lie ( oh yeah Iam going to rent it, then the 4 sale sign goes up a week later) in order to get the new loan on a property you have committed fraud. FHA has the only program option if you have to short sell your house in terms of a work transfer. (very strict and few lenders will actually do the loan) Both Freddie and Fannie have tried to implement % rates hits to loan programs if your current property is upside down while trying to purchase a new home to try and avoid fraud. 4-5 years ago a lot of loan officers just looked the other way when it came to borrower fraud. Realtors should not just look the other way if it is apparent that fraud may be taking place.

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Permalink Reply by Bryant Tutas on August 14, 2011 at 8:22am

In the newsletter today

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Permalink Reply by Roy Chambers on August 14, 2011 at 8:51am

Brian is right about FHA allowing upside down owners to buy & we should all keep in mind if this is a transfer or relocation (it was an out of state buyer) that FHA allows you to short sale & then buy immediately there after if the short sale was caused by the change in work & you've had no late payments in the past 12 months & you are current on your existing loan. 

 

It doesn't have to be fraud nor should you assume that. You are not helping her sell short- so don't get involved in that part of it, Focus on what she is asking you to do. Get her qualified with a great lender & make sure she told the lender what she is doing so there is full disclosure & no surprises.  If she qualifies great- sell her a home.

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Permalink Reply by Thom Colby 888-391-5245 CA Brkr on August 14, 2011 at 2:03pm

Coleen,

 

You've received some great answers here however I'd like to make another point to consider. 

 

As others have said, it really doesn't matter what this "buyer" is doing with their former home - or does it???? 

 

You have been told they are short selling their house and buying another - what you do not know is whether they are buying with their short sale lender's knowledge and "ok".  Obviously no one should assume anything about what anyone's situation is - but if it turns out that it is a Buy and Bail without the lender's knowledge and approval - it could be considered "Fraud for Housing" / "Fraud for Profit".  The best thing to do is ask them to put their exact situation and intentions in writing and have them sign it - you can then choose whether to participate in their situation or not.

 

Always remember to abide by Fair Housing.  Consult an attorney.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

 

 

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Permalink Reply by Nate Gerard on August 15, 2011 at 8:52am

Is it possible that she will complete the short sale without missing any payments? If so, and if she has good credit otherwise, she'll be able to buy a home just after she sells.

Maybe she just needs to wait until after the short sale is complete. She obviously hasn't missed any payments yet or she would not be able to qualify for a new mortgage right now. I have a BOA Co-Op short sale about to close (no missed payments) and one of the sellers will be buying within 3 months of closing on their short sale.

Good Luck!

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Permalink Reply by Jim McCormack on August 15, 2011 at 10:44am

I just helped a client do the same thing.  However, they had a unique hardship - a flood destroyed their primary residence and they did not have flood insurance to rebuild.  I would guess that this potential client would have a tough time qualifying for a mortgage due to having their current property listed as a short sale.  I would think that they would need to remove that from the market.

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Permalink Reply by Wendy Martin on August 15, 2011 at 11:18am

  I have had several short sale clients who bought a home while we had their short sale listed.  I think many have realized that's what's going to work best for them...buying while their credit is good, before the sting of the short sale.  Two of them bought in different states and needed letters from their employers explaining the move.  The others stayed in state and there was never a question from the banks.  The banks can be creative, why can't everyone else? I think the danger zone is making sure we don't "advise" people to do this. Refer to an attorney and CYA.

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