Short Sale Buyer
A year ago I started working with a woman, Carolyn, who wanted to buy a house. She was a first time homebuyer and excited to take advantage of the first time homebuyer tax credit.
Carolyn fell in love with a house for sale that was a short sale. We learned that there were already other offers on the home. Carolyn had me submit an offer that was above the list price. We waited knowing that it often takes lenders a couple of months to respond to short sale offers. After 2 months we waited some more. After 3 months we waited some more. After 4 months we learned that the bank had approached the sellers and told them that they wouldn’t foreclose, if the sellers would give them the deed. The sellers agreed. Carolyn didn’t get the house.
Early this year I showed Carolyn a house that was advertised as an approved short sale. The listing agent told me that the offer acceptance wouldn’t take as long as usual since the lender had already agreed to the short sale. Carolyn had me submit an offer on February 1st. We waited. We were told that the lender had misplaced the offer while moving their offices from Florida to New York. We waited. We were told that the lender was swamped with offers on other short sales and would get to Carolyn’s offer as soon as they could. We waited. After the offer finally got in the hands of someone who could make a decision, we were told that the original BPO (broker price opinion) for the property was too old. Another BPO needed to be ordered. We waited. Finally on April 22nd, nearly 3 months later, the bank accepted Carolyn’s offer.
On May 12th, one week before Carolyn’s scheduled closing we learned that another lender had a second mortgage on the property and that they didn’t accept the amount of money they would receive after the first lender was paid. We waited while the seller’s attorney approached the first lender about accepting less money. Yesterday, May 28th, we learned that the first lender won’t accept less money. The only way the sale can close is for Carolyn to pay an additional $9,000.
So Carolyn has a lot of thinking to do this Memorial Day Weekend. If she walks away from the sale, it will be too late for her to qualify for the first time homebuyer tax credit for another house. If she accepts the new terms, she’ll have to pay an additional amount that’s more than the $8,000 tax credit. Unfortunately, Carolyn’s experiences aren’t unusual in the world of buying short sales.
ABOUT THE AUTHOR
Fran Bailey shows, previews and tracks downtown Chicago homes for sale giving her the insights needed to help her clients negotiate the best price and terms. Fran has been quoted in numerous Chicago and national publications. To schedule showings of listings regardless of broker or to contact Fran email her at fran.bailey@bairdwarner.com or call 773.793.4516. Learn More
Fran Bailey, Realtor
{ 4 comments… read them below or add one }
Hi Fran, I know you cannot discuss strategy with a current client, but I hope you do go back to the bank and point out to them that they are about to lose a buyer and keep this house on their books over $9K. They will have to start the whole process all over and they may never get a buyer or have to accept an offer for even less than Carolyn is offering.
Hi Michael,
Everything you say makes sense. Unfortunately, from my experiences with sales involving banks I’ve learned that they will walk away from the best deal they’re going to get. They don’t know how to sell homes because that isn’t their business.
Yes, you read, that right. With just a six business days left to get the tax credit (while yes the house voted to extend the deadline, it still wasn’t settled) I was anxiously waiting to hear something. I knew my mortgage broker needed two days to close and I’d have to redo my homeowners and wasn’t sure how long they would need. Finally my real estate attorney called with the latest. While the first bank had accepted my offer, the second bank wasn’t happy. They wanted 10K more than what the first bank was going to give them. I came up with another 4K and they weren’t happy and then I ponied up the 5K they asked for on Memorial day.
So now the second bank was happ(ier), but now the first bank was upset. The first bank wanted me to keep the original offer, because a higher offer meant that they would have to give the second bank more money and they didn’t want to do that. So, the first bank proposed a work-around to the sellers attorney: keep the original offer and have the buyer bring cash to the table at closing to give directly to the second bank. That is illegal. Loan fraud.
Now the seller’s attorney was going to get a conference call with that person’s supervisor and try to get the whole sordid mess straightened out, but my offer and my mortgage approval was expiring that day. That paperwork would have to be redone, there was still no guarantee that I’d be getting a definite answer that day, but it just came down to thinking that if they’re suggesting fraud as a solution than they are just beyond dumb and I can’t work with them. It’s time to cut my losses and move on.
Now the house I made an offer on last year is back on the market and unbelievably, it’s listed at 25K LESS than what my offer was. I don’t want the house anymore, but between that deal-gone-awry and now this bank suggesting I commit fraud (and risk winding up in jail rather than a house!), I’ve learned that the banks don’t know what they’re doing when it comes to real estate.
And I’m right back where I started, a year-older and a little wiser and ready to find another house–just so long as its not a short sale!
So I heard back from my attorney who had back from the seller’s attorney after she had the conference call with the person’s supervisor.
They wanted to keep the asking price, and I would add another 9k to the down payment I was making that would go to the second bank.
And even that wasn’t a done deal. I could agree to that but both banks would yet have to agree to it and their response time has been a minimum of two weeks on everything which puts me past the tax credit deadline.
So without any guarantee and with having to up my down payment by more than what the tax credit is worth, it’s still a no-go. The house definitely needs some repair work and that 8k credit would have gone completely into it, plus more out of my own pocket.
So for a matter of 9k, the banks are letting the sale go. I could understand it if it was a few years ago before the collapse, but now? Stupid.