Replies to This Discussion

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on March 9, 2012 at 5:22am

Deena a couple of thoughts;

1) Lender can revoke the Short Sale approval all the way up to the minute of closing.  So, if the Seller accepts the Loan Mod, it is likely BofA will revoke the SS approval - this is always a chance buyers take when going into a short sale.

2) If the seller wants to stay, and they choose to fight you, you will likely not want this house.............

3) You should work immediately on getting your Deposit back as well as any inspection costs and appraisal fees ASAP before it gets nasty.  The only people making money on this will be the attorneys and the sellers likely will not vacate - they are the owners!

4) As for the furniture, you won't like what I'm going to say ----- you should not have bought anything until you had closed on the property.  With short sales, all is uncertain until you are closed & settled & have the Deed. And if you bought the furniture on credit that will affect your next mortgage approval.

 

Lastly, work with your Realtor to find another property - you likely will find something you like even more and at a better bargain.

 

Best of luck,

Thom Colby

Broker

Palm Desert & Newport Beach CA

Permalink Reply by Wendy Smith on March 9, 2012 at 5:48am

Gee, I just had the exact situation but my sellers don't believe they owe anybody anything.  We were supposed to close a week from today.  They too received a call regarding a loan modification - even though they had been turned down previously, even though they have vacated the house (moved out of state) - the seller still opted for a loan mod.  The house is at least $100k under water. 

Like you, the buyer had been so patient, visited the house countless times to plan for furniture etc.

The seller has absolutely no remorse or accountability to their contractual obligations - if they lived in the house I could maybe understand a teeny bit but they don't even live there - they've lost their homestead so re taxes will go up, h/o ins will go up and even with a modification - they still won't be able to pay for the house. 

In all actuality they will most likely be denied the loan mod - it's a FannieMae loan and they are non owner occupied and the seller is considered by FNMA to be a high income earner (per a letter from FNMA)

There isn't much you can do as the buyer - legal recourse would cost you thousands up front and then what? 

The listing broker can probably demand the commission he/she earned per the listing agreement but I'm afraid you are fortunate if you get your expenses back. 

I felt so bad for the buyers, the buyers agent, myself and actually the sellers too.  They've made a hugh mistake in cancelling the short sale.

Actually, I had another instance just like this but fortunately the buyer had not spent any money, only lots of time.

That seller also "got the call" - that seller too had been denied previously for a loan mod.  It seems that NPV doesn't factor into the equation any more when servicers are reviewing loan mod files.

I'm pretty sure all these calls are generated as a result of the robo-signing law suit but, then again, GSE loans weren't affected by the lawsuit settlement.

Sorry to ramble, I just wanted you to know you are not alone.

The servicers are making HUGE problems with these generic calls.   More damage than good for the borrowers.

Good luck to you.

 

Permalink Reply by joe beauchamp on March 9, 2012 at 5:50am

Thom nicely said it all. Worse than for you is the situation for the agents - after all this work, I doubt that the seller will give them their commissions, and, as Thom says, the bank can and will yank the approval with words in your contract about the bank and the seller being held harmless. It this were a normal sale, the commission would be due because the agent(s) brought a willing and able buyer - at that point, they did their jobs. However, the short sale throw in the "well, only if we feel like it" clause.  Sorry.

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on March 9, 2012 at 6:35am

Thanks Joe -

Unfortunately, the agents probably worked hard on these transactions and are not getting a dime for their efforts.  My concern is - is this a new "trend" and what do we (Brokers) face going forward .....

Permalink Reply by Kathleen Lordbock on March 9, 2012 at 6:13am

I do have my SS sellers sign a document stating that they do not want to do a loan modification and are pursuing only a Short Sale after considering their options.  I have not had one back out yet- but that piece of paper would not legally stop them.

Permalink Reply by Wendy Smith on March 9, 2012 at 6:19am

That's a good idea - there's a lot to be said for the power of the printed word but the sellers above apparently have no regard for the binding purchase agreement they signed.   

Ah, if only we could be paid up front..... 

Permalink Reply by Ben Racela on March 9, 2012 at 6:49am

For listing agents it is wise to ask the seller's if they have applied for a loan modification.  If they have but tell you that they only want to do a short sale now have them contact the lender and terminate the loan modification process and convert it to a short sale.  Most lenders will need a statement from the seller opting out of the loan modification.  That will ensure 2 things:  1) that there is no loan modification being worked on; 2) that short sale is the only option.  This must be a decision made solely by the seller's and not pushed by anybody else. 

This step will keep everyone honest about their intent and direction and avoids this type of situation.

For Buyer's agents.  The tough thing is that you are at the ability and knowledge of the listing agent.  What helps is asking the hard questions to avoid this situation.  If they cannot provide you with the answers you need then seek other options.

Permalink Reply by Wendy Smith on March 9, 2012 at 6:58am

Good advice Ben but in my two recent situations - each seller had been denied a loan modification.  The fact is that servicers are legally bound to allow the borrower to APPLY for a loan modification - the seller has to just pick up the phone and call. 

The atrocity here is that servicers are initiating the calls to borrowers without any regard to the status of the file.  These calls are perceived by some borrowers to be the way to "save" their home and many borrowers are desperate to keep their home - even in cases where the value of the property is unlikely to ever overcome the negative equity.

Homeowners too often think with emotion rather than common sense. 

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on March 9, 2012 at 7:06am

Wendy - you are correct.  I always have this conversation with the seller:

 

If the market recovered today it will likely take 10 -15 years for the value to come close to what you owe (depending on the numbers, I adjust the projection)  Then I ask, are you absolutely staying in this house for 15 years or more?  99% of the time they say "no".  And, I respond with then why are you going to prolong the inevitable.  Why not sell now, get out while there are antideficiency and debt forgiveness laws available, (because these temporary laws will not last forever), buy something at a better price in a couple of years and build equity in that new house over the next 10 - 15 years.......

 

Usually, it works and they see the light !

Permalink Reply by Wendy Smith on March 9, 2012 at 7:08am

You are right!  Also, unless extended again by legislature, the Mortgage Debt Relief Act expires this year as does HAFA. 

Permalink Reply by Kevin - Greenville, SC on March 10, 2012 at 5:23pm

HAMP and HAFA have already been extended until the end of 2013.

Permalink Reply by Wendy Smith on March 11, 2012 at 4:33am

oops! missed that memo!  Thanks.

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