Sellers Bailing on SS last minute, need some advice!
I have a BOA approved SS that is set to close. The second lien was removed due to national mortgage settlement act and the file is in BOA's closing department. Sellers have moved out of home and we have executed an early move-in with the buyers. Everything is set to close....Sellers call last night and want to cancel the SS due to a lawyer telling them he can save their home with a loan modification. I pursued these options and the only thing that has changed would be the forgiveness of the 2nd Lien.
BOA says the SS would need to be canceled and then start over with the loan mod.
Is a Loan Mod a possibility for them this deep into the deal?
-Sellers have moved out and are in a rental
-Early move in executed with buyers.
-Buyers now have renters in their home.
-2nd mortgage was only $300/month(now forgiven).
-Closing set for, on or before Dec 27th, 2012
-Sheriffs sale set for 1/17/13.
Any feedback would be much appreciated before I go to counsel my sellers of the situation they may be getting themselves into.
Replies to This Discussion
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Permalink Reply by Christine 'Chryssa' Lightheart on
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I suggest you review the 2nd mortgage and what it means to 'be forgiven'. The language is confusing to most homeowners. The owners may not have to pay the 2nd mortgage monthly but as soon as it goes back on the market and sold that loan will need to be paid off. This has been my experience. Most loan mods do not work. I don't think the owners will get their lender to cooperate on modifying a loan that is not their primary residence. Good luck. You have more research to do.
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Permalink Reply by Tony Morales on
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Chryssa, that may not be the case Bank of America has sent letters to homeowners that they are forgiving the debt and releasing their lien. And lenders are doing modifications on investment properties.
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Good to know about Modifications on investment properties. 35% of my 2012 business was in short sales. All were from failed loan modifications.
I suggest the agent finds out what 'forgiven debt' means in his owner's case. Wells Fargo wrote the same to a few of my clients. The owners were no longer being billed for the 2nd mortgage and the balance was not showing up on their statements. Easy to assume they were no longer liable for the 2nd. But the 2nd had to be paid off in the short sale. In fact they required a 'contribution' from the agents to close it. I hope he works it out. Thanks for your feedback.
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Permalink Reply by Teri Shaughnessy on
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Hi, I had this happen to me. The Seller would be in breach of contract. The buyers, if they really wanted to, could sue them for nonperformance. The Lender is NEVER going to give them a loan mod at this juncture. If the Attorney is asking for money up front, this is a scam. I would suggest your clients see a reputable real estate attorney for advice on this if they can. They signed a legal contract. They are getting bad advice from this attorney who approached them. Nothing is free with an attorney. They aren't paying you a dime to get this debt settled for them. Remind them of that. My 2 cents.
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Permalink Reply by Tammy Davis on
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I know it is only as good as the paper it is written on...but as part of signing the listing agreement I have the sellers sign a statement that they will not pursue a loan modification. It has always worked for me. We all know the lender is going to contact the borrowers to see about pursuing a loan mod after the short sale package has been submittted. Add to it Attorney's, media and the internet feeding into peoples minds that a short sale only benefits a realtor's bank account. The last thing any of us want is to have to deal with a scenario like this.
Best of luck to you....you're in a tough situation.
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Permalink Reply by Marcy Moyer on
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Letting the buyers move in before close is never a good idea.
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Permalink Reply by Jim Hale on
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Hard to imagine letting a seller allow prior occupancy on a short sale. Hard to imagine letting the buyer become a landlord prior to closing on their short sale purchase. Most likely actual lawsuits would likely be over these decisions.
But it is also hard to imagine that there are not weasel words allowing the seller to walk if he doesn't like the SS finale.
At the same time this loan mod idea sounds completely bonkers:
Coming from the lender: infuriating but hard to deal with.....except to buck it up the BofA chain of command seeking a cancellation of the sale. What is this valued attorney's plan on that?
Coming from an attorney promising the moon? Demands a conversation between your law and this trouble maker....not threatening legal action from any of the possible actors....but challenging the whole idea of a loan mod working.
Use the calculator. Figure their chances of success. Ask them to get a second opinion. Or have your attorney provide to the attorney in question. But under no circumstances should you give them any legal advice on any of this.
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Permalink Reply by Karen McNamara on
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Derik,
All the contract, legalities aside, your sellers need to know they are being sucked into one of the largest scams ever perpetrated.
I have worked with several sellers who were duped by "attorneys", claiming they can get a mod, even at the last minute. There are some actual attorneys who have carefully set up a system to scam these poor homeowners. They now advertise there are no fees, in compliance with the govt. regulations. But. . .they have a contract that spells out it will cost $2500 to $5000 for their SERVICES, collected in payments as they progress with the mod. They made one phone call to threaten the lender, resulting in a 6 month postponement of auction date. They filed a cease and desist so my clients could not get any information from the lender. One client paid $2300 after being told that the mod docs were in the mail. They called me when the final notice of auction showed up instead. We found out the attorney had not contacted the lender in over 6 months.There are several good sites to check the legitimacy of the attorney. The biggest scam is being run out of Costa Mesa or Santa Ana, CA. The name of the company keeps changing to stay ahead of the law. Check the FTC, and the HOPE hotline websites, they have a section about the legitimacy of attorneys. HOPE counselors can tell your seller if there is any chance of modification or not. If HOPE has said no, there is very little chance of ANY thing but SS or Foreclosure.
We have been putting out this information from our office everywhere we can, but so many desperate homeowners are still being taken in. Your sellers are not going to want to hear about the broken contracts, liquidated damages, lawsuits, etc. They will be grateful if you let them know there is about a 99% chance they are about to be robbed of MORE money to fraud. Hopefully you can get them a small compensation from the close of the SS. Good luck.
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As much as I can empathize with your situation, I would absolutely wash my hands of this one and let the lawyers hash it out. You and I know what the "right" answer is, but you don't want to be the source of that information. It's going to get extremely messy; sit on the sidelines and make sure none of it splashes on you. I don't know if you can still get paid. As others have said, it all depends on your short sale agreement. Good luck. Will watch to see how it all unfolds.
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Permalink Reply by Jerry A Cook on
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Ouch what a mess the sellers are looking to get themselves into!
So they want to modify and keep the property. Well, theyneed to remember that YOU and the selling agent have already earned a commission. So cancel, just cut our checks! And if they don't, sue 'em and put a judgement against the seller and it will go the house!
Guess the Attorney didn't tell them that 'little fact!'
Seller is in contract that is executable, and buyers are damaged, So the buyer can sue them, get a judgement and it, too, will go against the property.
Buyer could also go to superior court and fast tract a specific performance against the seller to force the deal to close. My assumption is buyer would win. AND get a judgement against seller for court/attorney's fees.
I know we don't sue our clients, especially short sale clients who have other issues, but they just tossed your work under the bus with total disregard as to your time (money) effort and knowledge to get a complicated deal done.
Unless you like working for free, I would have YOUR attorney outline these details with the seller and have them put this deal to rest, allow it toclose and move on, as they are going to get a pass on the 'phanton income' tax if it is finalized before the end of this year.
Hope this helps.....
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Jerry,
The commission is not necessarily guaranteed. In Connecticut, we are REQUIRED to add a sentence to our listing agreements stating, in essence, that if the property does not CLOSE, for WHATEVER reason, the commission is not due. That is required of us from various Loss Mitigation Departments and I believe will be the wave of the future in short sales. The original writer needs to see what it is that his clients signed.
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Yes, we are seeing that here in California, too. We block that text out and do not agree to it. Banks are approving issuance of a short sale demand letter, they have nothing to do with the terms of a prior contract between seller and broker. But the recent changes in the 'pre approved' short sale language should be sending shudders through all brokers heads! Banks are stating that to paraphrase, if we take the short sale we are certifying that the information submitted by the seller is accurate, buyers financial data and loan data is accurate, and there is no 'outside' agreements between any parties, and we are responsible if this proves to be inaccurate!
AND the last one that I saw that was just unbelievable, IF any of the above proves inaccurate, the bank can sue the seller and get the forgiven debt and all costs and unpaid interest reinstated against the seller!
We issue a notice of non-responsibility back to the banks/servicers specifically excluding the certification or responsibility for the information gathered and forwarded on the lenders clients behalf.
Oh yeah, one last thing, I make sure my E/O is with an good company as I know this short sale business is going to come back against the Realtors in a few years!
Good luck, 2013 looks to be a much better year, even in Broke California!
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