After more than a year, seller is now concerned...

Thanks for Broker Bryant for pointing me to this website. I hope to get some valuable information here. I'm having a problem with one of my sellers. After more than a year of marketing this listing, and after 3-1/2 months of working a good offer and nearing the end of the short sale process, the seller is getting cold feet. Basically, he's not sure how this short sale is going to affect him or obligate him financially, once the deal is done. I've done my best to explain what I know, but honestly, it's even difficult for me to know "exactly" what could happen, when there are varying opinions and experiences between different lenders, etc. And, even reading AR, I see lots of possible scenarios, and not much consistency. I advised the seller to seek the advice of a real estate attorney and/or a CPA for the "solid info". Side challenges on this is that the seller agreed to let the buyer occupy the property on a rent-til-close lease. The buyer is a military family and the active duty husband is already deployed to Iraq. The seller isn't overly sympathetic to their situation, and more concerned about their own things. I understand that, but I think it's a point to be made. What advice can you offer me to share with the seller in this situation?

Replies

Bryant Tutas August 7, 2009 at 1:03am

Eric, The lender is not concerned with the buyers financing. If all they came back with on the HUD is they won't pay the pest inspection then I'd say the buyer should be happy. The buyers agent can pay the pest inspection. I'm sure it's less than $100.

Glad to see you joined the site. I hope you find it helpful.

I have attached a list of VA allowable/non-allowables
Allowable_Non-Allowable.pdf
Eric M. Boyd August 6, 2009 at 3:19pm

Thanks Stephanie. Yeah, I think the buyer was hoping that if they came with an offer higher than the anticipated BPO value (which became reality), then the lender might allow the extra stuff. I prepared their agent, though, for a worst case scenario, and to not expect the appliance and fence costs.

Off-topic, but still about this deal, the email I got from the negotiator today was asking for the usual updated HUD, hardship letter, etc, 6 items total. And, of course, they include a big red letter warning at the top that says, "If we don't get all docs within 48 hours, we will close the file." (Why do they think they can do that, after making us wait and wait and wait?) Anyway, one of the conditions was that they won't pay for the pest inspection. Being that this is a VA buyer, isn't the bank obligated to allow that to be a seller expense? Maybe the negotiator just didn't look at the contract?

Stephanie Lim said:
There is not a whole lot of consistency in short sales. Every experience is different and unpredictable and I warn the sellers up front and remind them over and over. If they have any concerns at all encourage them multiple times to talk to an attorney and CPA. Indymac usually does lien release only in my experience. My experience with Indymac has been that the experience varies GREATLY from negotiator to negotiator. I hope the buyer isn't counting on all of those concessions. :-)
Stephanie Lim August 6, 2009 at 3:12pm

There is not a whole lot of consistency in short sales. Every experience is different and unpredictable and I warn the sellers up front and remind them over and over. If they have any concerns at all encourage them multiple times to talk to an attorney and CPA. Indymac usually does lien release only in my experience. My experience with Indymac has been that the experience varies GREATLY from negotiator to negotiator. I hope the buyer isn't counting on all of those concessions. :-)
Eric M. Boyd August 6, 2009 at 3:11pm

Thanks Wendy. What can the seller expect as far as tax implications on forgiven debt through the short sale, being that this is an investment property? And, can the Lender come back after a period of time and seek a deficiency on anything? Or, is that something the lender must disclose prior to the closing? These may be questions for an attorney/CPA, so I understand.

Wendy Rulnick said:
Eric - First, I don't know if Indymac will concede all those costs on the contract.... I think you gave the seller great advice to seek legal counsel, etc. Have you explained that in terms of future borrowing, Fannie Mae may allow a new mortgage in as little as two years (less if no payments missed, etc). A Deed in Lieue of Foreclosure or Foreclosure will affect Fannie Mae borrowing for 4-7 years, with restrictions. Also, DIL and Foreclosure require affirmative "yes" on mortgage applications. These are facts, you can find them on Fannie Mae website. How the seller will be affected exactly will depend on how Indymac approves the short sale. It is very frustrating to have a seller considering bailing on a signed contract! Let us know what happens.
Wendy Rulnick August 6, 2009 at 2:21pm

Eric - First, I don't know if Indymac will concede all those costs on the contract.... I think you gave the seller great advice to seek legal counsel, etc. Have you explained that in terms of future borrowing, Fannie Mae may allow a new mortgage in as little as two years (less if no payments missed, etc). A Deed in Lieue of Foreclosure or Foreclosure will affect Fannie Mae borrowing for 4-7 years, with restrictions. Also, DIL and Foreclosure require affirmative "yes" on mortgage applications. These are facts, you can find them on Fannie Mae website. How the seller will be affected exactly will depend on how Indymac approves the short sale. It is very frustrating to have a seller considering bailing on a signed contract! Let us know what happens.
Eric M. Boyd August 6, 2009 at 12:41pm

Here's some facts on this transaction, if they're helpful.

Only one mortgage. Indymac/One West Bank
18 months in arrears
Mortgage Balance ~$275k
BPO value $190k
Investment property

Offer is $198k
VA Financing
Buyer requesting Seller to pay up to 2.5% for Buyer Closing Costs
Buyer requesting Seller to pay up to 4% for prepaid, new appliances, and a fence (yeah, long shot)