Is it LEGAL for a Seller to submit documents fro both a Short Sale AND a Loan Modification?
I have just run into a situation where my buyer had a contract in on a "Potential Short Sale" that was going to be foreclosed on this month and NOW that the bank has postponed the FC sale ... the Sellers have decided to do a Loan Modification even though neither of them have an income or job .... how can this be?
I have been told by more experienced agents than myself that the financial information that the banks need for a Short Sale is much different from what they need for a Loan Modification. One person told me that there must be some sort of possible fraud going on if the sellers have submitted fake paperwork ... do we have grounds for an "inquiry"?
Can anyone spread some light on this subject because now I do not want to put anymore offers in a SSs if this is what can happen :(
Thank you all for any "inside information" that you can share :)
Trina
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Comment by Joshua Gayman on September 16, 2011 at 9:27am
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Yep totally legit for the seller/borrower/homeowner to do that if that's really what they want to do. Could be their agent not directing them and educating them properly or it could be that they just feel more comfortable with that route for now. Obviously they don't want to move. These things can make buying short sales frustrating, but if you count them out altogether you will miss out on some of the best deals, just depends on how much time you have to make your purchase.
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Comment by Enrique Vasquez-Plaza on September 15, 2011 at 4:58am
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wow, what a great question.
Despite I am not an attorney, I can surely say that that "illegal" term depends on the context.
Seller may be in breach of a legal contract (if there is a sale already contracted and enforceable) Current laws and civil codes protect the most vulnerable ones (yes, the borrower/seller) so they always have the right to cancel and fight back for their home (their loss). thank God they are doing it at the get go and not 3 days prior to closing... MARS regulation protects them and services comply with it. BUT be clear with your client that there is always a point when a decision has to be made. This is why is so important for Realtors to understand when a modification is mathematically possible and when is not, because clients expectation may be just impossible and unreachable.
I would explain mod alternative (is it temporal, payment will go up., delinquency will be added to the back of the loan, principal will raise, principal will not be reduced, etc..) then you explain if is doable. FINALLY, once mod is not an option, you commit them to proceed with ss and not to look back (of course they can always do) but at least you have a more committed seller!
Good lcuk!
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Comment by Jeff Payne on September 14, 2011 at 2:34am
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It is not uncommon for a seller to be working both a short sale and a loan modification at the same time. Sounds to me like the seller wants to try to stay in their home. The loan modification and short sale paperwork is not that much different, each depends on the lender.
The seller still owns the home and can do what they want with it. Most likely they wont be successful with the loan mod because loan mods rarely work. No need to think fraud based on what very little information you posted
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