Need Advice on Short Sale Situation QUICKLY - Last Minute Notification of Denied Seller Assist - Municipal Employees Credit Union NY
I represent the Buyer in a short sale in NJ, which has been going on since Feb '12. My buyer offered the list price, but requested a 6% assist. There have been some ups and downs, but we were finally notified that the bank had accepted the short sale in late July. The third-party negotiator that was hired by the seller has been less than communicative, unless pushed for information. We were initially set to close the end of August, but the underwriter for my buyer’s mortgage co. wanted some additional conditions met, so at the last minute a request to change the closing date was submitted. We were told Fannie Mae needed to approve the extension, etc. My buyer proceeded to work on the conditions submitted.
Fast forward to two days ago, Fannie Mae and the credit union had agreed to an extension. The mortgage was approved and the prelim HUD-1 without the Buyer charges was sent over to the 3rd party negotiator to submit to Municipal Employees Credit Union for approval. At this time, he stated to the title co. that the 6% seller's assist should not be on the HUD-1, since it was rejected 3 or several months ago his story wavers on this point.) This information was never shared with me or my buyer, heck, the listing agent didn't know about it. Also, he stated that it was on the prelim HUD-1 that was sent out prior to the closing that was to take place in Aug, but that HUD-1 was not shared with me, as the title co wasn't going to send it out to all parties without the mortgage co numbers. His contention is that since it wasn't on the Aug prelim HUD-1 (which I never saw), that constitutes notification that the bank rejected the seller's assist and I am now "stalling". There is no need to stall as the mortgage is approved, pending verification of the seller's assist, which was written up in the contract. He contacted his attorney and informed everyone that his attorney advised that the listing agent/office can seek recourse through the local Assoc. of Realtors or civil means.
One, if no notification of the banks rejection of the seller assist was provided in a timely manner, although it is clearly requested in the contract (which was signed by seller, buyer and both agents); the deal technically would be dead. Correct?
Two, I worry about where my buyer falls in this, as they have spent money on lender and township repairs, HI, survey, etc. Not to mention the deposit that is currently held in escrow.
Any advice is greatly appreciated. To my knowledge, the negotiator is not affiliated in any way with the credit union.
Replies to This Discussion
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Permalink Reply by April Cooke on
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This is why it is so important for buyers agents need take classes on the short sales. You will understand the process better and know what should be going on every step of the way. What to look and ask for. You will also know if the listing agent knows what they are doing. Bottom line you should have a copy of the approval letter with the terms. But the other agent shoukd have sent you an addendum with the new terms months ago.
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Permalink Reply by Kevin - Greenville, SC on
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More so then taking classes I would suggest they even partner with a Listing Agent who is actively and successfully working Short Sales.
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Permalink Reply by Isabelle Javier on
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Hi Jay,
I believe this is salvageable.
They cannot force your Buyer to perform if the Bank cannot approve the terms in the offer. I sense you would rather have your client purchase the home then go through a legal battle. So long as your Buyer can close with only 3% credit and I would think they should be able to perform as most closing costs rarely exceed 3%. And providing this will be your first extension request to close, my recommendation is as follows:
- Request a copy of the original written bank approval letter so you can look at the break-down of line items the bank is willing to pay at closing. A copy should have been given to you when it was produced. (Required by law in California)
- Request a copy of the original HUD which was submitted in order to attain the above bank written approval.
- Have the title/escrow company restructure the HUD with 3% closing costs credit to Buyer and any other necessary adjustments based on your review of the above two items. Review a copy of it before it is sent out so you can make sure everything looks good.
- Draft an Addendum to be signed by both Buyer and Seller agreeing to a reduction of closing cost credits from 6% to 3%. Add verbiage that the ability for the Buyer to perform is pending on approval of the 3% credit.
- Have the Listing Agent contact both banks explaining the misunderstanding (error) which took place and have them resubmit the new HUD along with the signed Addendum.
With that said, there is a good chance that the bank will approve. I've been there where a listing agent made a similar error (I was representing the Buyer) and I forced her to re-submit. She was shocked to see the bank approved the change which amounted to a 2.5% credit error. We're all human, and these mistakes happen. Although I think your situation sounds a little more underhanded. So it's never too late to try one more time.
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Permalink Reply by Mike Horton on
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Wow, this deal is so bad on so many levels it hurts just to read about it. But ultimately, the listing agent has the biggest problem in my opinion. He has lost control of the deal and maybe not intentionally, but has abandoned his responsiblity to his client by turning the deal over to the "third party negotiator". He admits he does not know what is happening and is not a part of the short sale negotiation. (To qualify this statment; in Arizona whom ever has the listing contract has the ultimate responsiblity no matter how many third parties are helping out in a deal). So now you have a sale where the contracted seller concessions to the buyer will not happen. The seller has been spending months of expenses to keep the home up. The seller maybe close to a foreclosure and could lose his home and have his credit significanly impacted over what could have been with a short sale. The listing broker and agent are ultimately responsible to their client and should carry the burden of a blown deal.
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Permalink Reply by Thom Colby CA Brkr 888-391-5245 on
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At the end of the day, the Purchase Agreement as it is currently written with all Addenda prevails. If the Purchase Agreement has not changed and continues to state the seller will provide 6% seller contribution and the lender didn't approve it. The deal is DEAD and the Buyer should get their deposit back (assuming everyone agrees to cancel).
When you said........ "We were initially set to close the end of August" - What were the terms of that approval??????? Had the seller concessions already been denied? This is not something that suddenly happens at the last moment.
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Permalink Reply by Kristy Hamilton on
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I negotiate short sales with a real estate law firm and also the title agent. When the short sale lender cuts fees, I send that informaion to the listing agent to discuss with the selling agent and then they are to advise me of their response: okay, no, compromise. I am not trying to make excuses for this negotiator, but he may be dealing with a minimum required net and costs couldn't be cut elsewhere. I keep a copy of all of my correspondence which includes the Buyer response to any such issues. This way, when it gets down to the line and amnesia sets in, I am covered. If this is not the case, then creativity has to be put to work. I agree that it would be worth a try at 3%, but would ask for a copy of the prelim HUD (tell them that you understand that the Buyer's side will not be accurate) and any minimum, required net if that is an issue. (If it is a minimum required net, it won't matter - you won't get 3% or 1%). I try my best to salvage fees based on the contract as I am sure other negotiators (including our fee), but some lenders don't give you any clue that they are cutting costs until, BOOM, they shoot out an approval letter and that is when you see all the costs that they decided to cut/ignore/delete, etc. My take on that is that they get you so excited to get an approval letter that you are just supposed to "make it work," anyway. So, what do you do? You have a Buyer that someone has told will get a short sale in 3 months (happens, but unrealistic), have been "about to walk" for 3 months and an amended approval letter that could take weeks to dream of getting. Is your Buyer willing to wait for an amended letter? Maybe, your Buyer can get a mortgage from one of the mortgage companies that is offering "0 closing costs" specials.
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