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Looking to buy before short selling home? What am I missing?

Posted by Coleen DeGroff on August 9, 2011 at 3:50pm in Short Sale Discussions
Hi all, I was contacted by an out of state buyer today looking to move into our area. Yay, right? But then she tells me she's just listed her home as a short sale. Her timeline for buying something here? Now. Okay, what am I missing here? She says she has plenty of money to close a deal here - which I am thinking the lender she is claiming a hardship with is going to find beyond interesting. I just don't get it. Have the rules changed or something? How can you claim a hardship in one state on one house while attempting to buy a house in another state? I'm completely baffled.

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Tags: Hardship, sale, short
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  • Jennifer Garcia March 10, 2012 at 1:15pm

    I just started taking these kind of clients but I make sure I bring them first to the Real State Attorney and accountant.  Then, I feel a lot better that they received an advice from the professionals.  What they do from there is up to them. They were warned.  I make sure I have them sign a letter releasing me from liablity because I advised them to seek counsel and were given advise.  I find a home for the homeowner and make sure I have the advise of the lawyer at all times when I short sale the house.  The lawyer is also hired to help get approval on the short sale.  I will NOT do this without the help of a lawyer. One month missed mortgage of the homeowners to pay a lawyer is all worth it!  That releases me from laibility.

    • Ann Wilkins > Jennifer Garcia November 15, 2012 at 2:59pm

      I just picked up a listing where the seller knew he would be downsized so decided to move to the Midwest for lower cost of living.  He purchased a property in the Chicago area.  His house was listed as a regular sale, however, after a few months it is not selling at the current price and any price reduction would be a short sale.  He has owned the property in the Midwest for about 6 months.  We will be bringing his current home with one Citimortgage loan to market.  Is there going to be a problem in that he recently purchased something?

  • Jim McCormack August 16, 2011 at 6:13pm
    Please see my blog post Waiting Periods to Buy a Home After Foreclosure, Deed-in-Lieu, Shor... about obtaining a mortgage loan after a short sale, foreclosure or bankruptcy. As you will see, it will probably not be possible.
  • Richard August 15, 2011 at 5:26am

    Thom,

     

    Although there are many scenarios out there and I would think most agents generally would want to help the consumer and public.  As a buyer, I wouldn't and should never ask anyone to take a chance on their career.  There are however, people who could care less.  My agent's rule-of-thumb, if it looks suspicious according to the law, pass on it.   Thom, your advice in being cautious and CYA are great words of wisdom.........

  • Thom Colby CA Brkr 888-391-5245 August 15, 2011 at 4:46am

     

    I can hear it now.....

    "Your Honor, they told me they were selling their current house as a short sale and we needed to get this new house closed before their credit was ruined, I didn't think anything was wrong with that... I was only doing my job, I'm just trying to earn a lilving."

     

    We all need to be careful in what we choose to participate in.  Here in Orange County, CA the District Attorney has established a Housing Fraud Division full of attorneys and investigators specifically to find these type of activities and they have engaged many Realtors to assist them in discovering agents who might be knowingly (or unknowlingly) participating in Housing Fraud.  I know it is also happening in Houston and several other cities around the country.

     

     

     

  • Wendy Martin August 15, 2011 at 4:18am
      I have had several short sale clients who bought a home while we had their short sale listed.  I think many have realized that's what's going to work best for them...buying while their credit is good, before the sting of the short sale.  Two of them bought in different states and needed letters from their employers explaining the move.  The others stayed in state and there was never a question from the banks.  The banks can be creative, why can't everyone else? I think the danger zone is making sure we don't "advise" people to do this. Refer to an attorney and CYA.
  • Jim McCormack August 15, 2011 at 3:44am
    I just helped a client do the same thing.  However, they had a unique hardship - a flood destroyed their primary residence and they did not have flood insurance to rebuild.  I would guess that this potential client would have a tough time qualifying for a mortgage due to having their current property listed as a short sale.  I would think that they would need to remove that from the market.
  • Nate Gerard August 15, 2011 at 1:52am

    Is it possible that she will complete the short sale without missing any payments? If so, and if she has good credit otherwise, she'll be able to buy a home just after she sells.

    Maybe she just needs to wait until after the short sale is complete. She obviously hasn't missed any payments yet or she would not be able to qualify for a new mortgage right now. I have a BOA Co-Op short sale about to close (no missed payments) and one of the sellers will be buying within 3 months of closing on their short sale.

    Good Luck!

  • Thom Colby CA Brkr 888-391-5245 August 14, 2011 at 7:03am

    Coleen,

     

    You've received some great answers here however I'd like to make another point to consider. 

     

    As others have said, it really doesn't matter what this "buyer" is doing with their former home - or does it???? 

     

    You have been told they are short selling their house and buying another - what you do not know is whether they are buying with their short sale lender's knowledge and "ok".  Obviously no one should assume anything about what anyone's situation is - but if it turns out that it is a Buy and Bail without the lender's knowledge and approval - it could be considered "Fraud for Housing" / "Fraud for Profit".  The best thing to do is ask them to put their exact situation and intentions in writing and have them sign it - you can then choose whether to participate in their situation or not.

     

    Always remember to abide by Fair Housing.  Consult an attorney.

     

    Best of luck,

     

    Thom Colby

    Broker

    Newport Beach CA

     

     

  • Roy Chambers August 14, 2011 at 1:51am

    Brian is right about FHA allowing upside down owners to buy & we should all keep in mind if this is a transfer or relocation (it was an out of state buyer) that FHA allows you to short sale & then buy immediately there after if the short sale was caused by the change in work & you've had no late payments in the past 12 months & you are current on your existing loan. 

     

    It doesn't have to be fraud nor should you assume that. You are not helping her sell short- so don't get involved in that part of it, Focus on what she is asking you to do. Get her qualified with a great lender & make sure she told the lender what she is doing so there is full disclosure & no surprises.  If she qualifies great- sell her a home.

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