Should we suggest to our clients to be late in their mortgage payment for a successful short sale?

Wells Fargo and Chase will be involved in the short sale of a house. I called both banks and asked about their policy to implement a short sale before a client was late... Before they ran out of money. Neither will look at the file prior to an offer. I'd hate to lose a buyer by not being able to process a short sale due to my client not being late. How do you handle this?

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Permalink Reply by Johanna Devon on August 19, 2012 at 9:21am

Tom. Number one rule for real estate agents. NEVER, ever  tell a seller to stop making payments.  If the banks won't say it..then you shouldn't either.  If something goes wrong... for whatever reason...the seller will blame you.  If you told them to stop making payments..and their credit is damaged..you will take the fall in a big way.  SO NEVER<EVER..tell anyone to stop making payments.  Start the short sale process.   Get all you paperwork to the lender.  Banks will start the process..even if they aren't late. need some help call me 703-606-7504

Johanna Devon, Principal Broker

DHR/Commercial,Land & Residential Brokerage

Haymarket, VA

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on August 19, 2012 at 9:26am

I never tell anyone to stop making payments - I always refer them to their Attorney and Tax Preparer.  Quite frankly, most do not have either and eventually make whatever decision on their own - but it wasn't me that told them what to do.  Whenever that conversation comes up, I make sure to document it in my Top Producer notes.

Permalink Reply by Meli Van Natta on August 19, 2012 at 11:18am
Note they didn't say they wouldn't consider it before it was late, they said they wouldn't consider it without an offer. So, send them an offer! Surely you have no shortage of buyers!
Permalink Reply by Rodney Mason on August 19, 2012 at 2:29pm

No one should ever tell a borrower not to make a mortgage payment.  Doing so could have serious liability issues.  One a payment is missed, it's a game changer for options.

Permalink Reply by Debbie Geavaras on August 20, 2012 at 2:12am

I never advise a seller to miss their payments however, one was just declined because they were only 17 days late.  The negotiator said resubmit whole package on day 31. 

Permalink Reply by Camelia Vera, Arcadia, CA on August 20, 2012 at 2:45am

I think it is easier if your Clients come up to that conclusion. You can explain how hard it will be for them to rent once they have bad credit and that they should consider renting while they can. I'd also explain it is easier to sell an empty house. Once they rent, they are no longer eligible for HAFA moving expenses. And the ability to pay question gets thrown out the window because if they can afford to rent and make their house payment, they should not be doing a short sale! But it is always their choice. 

If you get any correspondence back from the bank regarding their short sale, you should share with them the information. I think it is unwise to ever suggest they don't make their payment because Clients should always be the ones deciding what their next step will be. That way you can honestly say you never advised them to stop making their payments and they decide that on their own. Best wishes. 

Permalink Reply by Joanne Finochio on August 20, 2012 at 5:04am

I have a short sale with Chase and is backed by Freddie Mac and they will not look at the short sale unless the seller is behind on there payments

Permalink Reply by Raymond Edward Beem on August 20, 2012 at 7:37am

Tom; I would suggest, you list the house, send the listing agreement to Wells (assuming they are the first lein holder), put the house on the market at fair market value.  Along with the listing agreement include paystubs, bank statements, hardship letter and other documentation as necessary.  Once you obtain an offer send it in. 

  You have done your part without them missing a payment.  I think it is travesty that banks made people miss payments before they will consider a short sale or modification.  Banks should be held accountable for the deplorable conditions they put their (customers) lenders through.

Permalink Reply by Paddy Deighan, Esq on August 20, 2012 at 10:12am

Providing advice on this is a no win situation. If you do suggest and the sale falls through, they will arguably be in a worse situation and blame you. If you do not advise them to do it, the probability of a successful short sale is diminished.  This is one reason that I tend to favor 3rd party negotiating firms - insulating agents from liability.   It is also Arguably the practice of law to do this or mortgage broker advise.

Paddy Deighan J.D. Ph.D

Permalink Reply by Team Musser on August 20, 2012 at 12:16pm

We have a HAFA Chase short sale goingnow  that was never late. They did the BPO before we had an offer. Only B of A required sellers to be late. We never advise, I suggest they call their servicer and ask if they can be considered for a short if they are not late. HAFA as you know requires 60 days late minimum for Freddie loans, and no late requirement for Fannie.

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