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 Toni Nicholas on
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BOA has tried that with me after they have requested the buyer's name and contact info. They "told" me to add it to the P&S, and sign it, but I wouldn't. I left it out and told them I don't work for free. Further, I'm not about to allow a bank to cut me out of the deal and deal direct with the buyer with no recourse... They eventually dropped their demand, and we closed the short sale. Any brokers/agents who agree to this tactic are only undermining their own work and the ability to get paid. Don't do it!
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Permalink Reply by 31cg1fw8yxswn on
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required by who or what?
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Permalink Reply by CJ Thomas on
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If they still have consistent income, then yes, it's an outside, miniscule, remote chance that a loan mod would get approved. But with a sale date that close they are probably entering a world of pain that will end up in foreclosure. You never want to be battling a pending auction date because they're never required to cancel it for you. They'd be trading a sure solution with an accepted short sale deal that's going to save their credit and rid them of outstanding debt and tax consequences in exchange for a roll of the dice that will almost certainly result in foreclosure. Taking this gamble is foolish to say the least.
The sellers need to face the harsh reality that they can't afford this home and the short sale is going to give them a fresh start in which they could buy again in as little as 2 years.
Also, you've put in the time and effort to get the short sale approved and deserved to get paid your commission. Technically it's a breach of their listing contract with you to back out now since you've already performed on everything you set out to do. Not they will but they should have to pay your commission and that of the buyers agent for backing out at this juncture. They're breaking contractual obligations with not just you but the buyers and buyer's agent as well. It's not just about them at this point in the process.
It's always good to set these expectations up front with sellers. At your first meeting go over the options and let them know that if we're pursuing a short sale then that's the option we're committed to until the end.
From what I've noticed, most everybody on this forum wants to help homeowners. Usually a short sale really is their best answer. I think you'd be doing them a disservice to indulge them in their loan mod pipe dream in this scenario.
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One more thing - I've had so many attorneys mess up my sales, it's really quite amazing how many sales I've lost due to attorneys. Although you should notify your sellers to always consult with an attorney, it really is unfortunate when they do and find one who is not working in their best interest, as in this case presented here. In fact, there are many attorneys who either do not understand the whole problem, don't understand what short sales are all about, mess up the HUD ALL the damn time - after you've negotiated it, and on and on. Just because someone's an attorney does not mean they actually have brains, does not mean they understand real estate law and short sales, and does not mean they have ethical motives, or all of the above. ...It's sad, but quite true. And, when you have "lost" your sellers to the misguided consultation of an attorney, just CYA! Get your own attorney to draw up releases, and get your brokerage covered - period. Good Luck!
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Toni,
I could not agree more overall. As an agent in commercial sales I had more contracts dissolved by attorneys than closings. One commercial closing I had, buyers, sellers, agents, and attorneys were around the table (bad idea in any closing, but I was not in control of that). The Buyer and seller both looked at the agents and said "We scre*&^ each other as much as we can....its your turn now". They demanded a 50% cut in our commissions to close. I told them all that there are no contingencies, the loans are approved, the contracts are perfected, and I have already earned my commisson. I turned and walked out. The other agent went crazy with me..I just told hiim to go get control of his client. I told him I already took control of mine. 20 minutes later the deal was done and the other agent's client told me he likes a man with integrity and shook my hand.
Since that day I have rules about attorneys involved in real estate deals. I suggest you talk with your attorney and set up the "standard list" for your clients to seek advice about Short Sales with their attorney. Remember that the preface to the assignment of work for the attorney is to make this deal happen, minimize liability,...etc...you get the idea I think.
Rules:
1. all dealing with attorney will be in writing, asking legal opinon and legal advice in writing ONLY.
2. Attorney is noticed that they are there to facilitate the closing in the best interests of the client, all the parties being able to perform, and the contract, not stop it in any way.
3. Attorney is limited to written legal opinon and advice regarding the transaction in anything not specificly asked but necessary to know regarding affects etc of the contract.
4. Attorney will answer specific questions and make review of documents and give written legal advice and opinion unleass otherwise requested to create letters and documents.
5. Where an attorney finds any "red flag" about anything he is to advise of possible ways to resolve the matter only, not be involved in the resolution process unless asked to intervene or create a resolution by both the client and the other professional agent(s) involved.
You will find that MOST attorneys will not accept the assignment at all. Thier bread is not buttered on doing legal work on behalf of assuring a transaction closes without difficulty. They certainly never put legal opinion in writing if there is any way to avoid it (E&O kicks in).
I required my clients to sign an agreement regarding this with me so that I had something to hold over the attorney when he was not performing, interfered, or tried to stop the deal.
The really good part about all this is that any legal opinion given by the client attorney in writing can be used in the negotiation itself. It is ammunition to handle issues and create a closing.
Hope this helps you.
Dirk
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The sellers also need to know that if they decide to try and modify, then want to do a Short Sale, the Debt Forgiveness Act has expired and they may have more financial obligations than if they Short Sale and close by December 31st.
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Ask your Seller's to ask the Attorney to guarantee that they will get a loan modification in writing and signed by that Attorney! I highly doubt that Attorney will give that to them!
I worked at a Bankruptcy Law Firm were they do loan mods. Our agreement at that Law Firm stated that obtaining a Loan Modification was not guaranteed. I use to get clients that were being told by other Law Firm's that they could do miracles for them (All Talk), when I knew that the owner couldn't qualify for a loan mod! So off they would go to other firm, get ripped off, and them come back to us for assistance.
So I would start by asking them to do what I stated above, then let both parties know that they should each be prepared in seeking advice from a RE Attorney just how everyone is suggesting.
Best of luck to you Buddy & Happy Holidays!
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Permalink Reply by P Nicolas Velecico on
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What no one asked is if the sellers hardship that caused them to seek a SS been resolved ? If so they could very much qualify for a mod , you can always have the sheriff sale postponed .
As far as the legalities of breaking the contract , if the seller is upside down with a ton of other debt , whats another judgement ? , they can just file BK , stop the FK for a few more months and then try another mod or SS after the BK has been discharged
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Permalink Reply by Jerry A Cook on
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That is why the Listing Realtor interviews the seller. Always lots of 'ifs', BUT IF his situations changed to allow a loan mod and he wants me to walk from my time invested, Pay Me! Or I will seek compensation through the courts. He wants to modify to keep the home because things are looking up..... at the Realtors expense! Foul call and we need to be compensated for our efforts and, inthis files situation, success in getting an approval to close!
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Permalink Reply by Mike Rosania on
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If all else fails, I would send them the link to this thread and they will see the opinions and experiences of many professionals involved with distressed property sales and should hopefully help them reconsider.Good Luck
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