There are several lessons in this unusual Sacramento short sale story, but perhaps the most compelling is how the lowest short sale offer can end up the highest and best. It may give hope to those frustrated buyers who desperately want to buy a short sale in Sacramento but keep getting squeezed out of deals. As a busy Sacramento short sale agent, I see it all, but this one takes the cake. (All names have been changed.)
The seller of this sprawling Sacramento ranch home initially received offers from 2 short sale buyers. Smith offered $300,000. Anderson offered $298,000. No joke, the offers were almost identical and above list price. Because the seller did not want to close escrow until June 1, submission of the short sale package was delayed to coincide with that date. So, the buyers waited 4 months. Just before the bank approved the short sale, Buyer Nguyen submitted an offer for $325,000 (for $25,000 more) which the seller directed me to send to the bank.
That $325,000 offer was received too late, and the short sale negotiator approved Smith's offer of $300,000. The seller, who didn't want to pay higher taxes on mortgage debt relief, called the bank and insisted that the bank approve the offer from Nguyen. After all this time of waiting, Smith and Anderson lost this short sale because the bank approved Nguyen's offer of $325,000. Short sale offers are subject to bank approval.
Smith had thought she had won the home hands down. It was a spacious one-story with a fabulous layout, tons of updates, with a view of a nature preserve, and in an instant, her offer went up in flames and vanished. Nguyen won. Anderson, the lowest offer, was disappointed as well but was not nearly as unhappy as poor Smith.
Nguyen triumphantly marched into escrow, put down a $10,000 earnest money deposit. Nguyen decided to take advantage of the short sale bank's offer for a repair reimbursement and made repairs to the home prior to loan doc approval. Subsequently, Nguyen's loan was denied due to what underwriters refer to as a potential buy and bail situation: because Nguyen's wife owned another home in Sacramento that was upside down. Why the mortgage broker did not address this problem from the beginning was never clear. Nguyen's mortgage broker gave the mortgage package to a different investor whom, the broker promised, would issue approval in 3 days.
The seller agreed to extend escrow, but began to fret. What would happen if Nguyen was turned down again and the seller's home went to auction? The foreclosure had been postponed for 45 days. Time was running out. I checked with the agents for Smith and Anderson. Did either of them still want this short sale home? Anderson did. Anderson was willing to match the price in the short sale approval that Nguyen received.
Three days came and went. A week went by. Nguyen's loan was denied again. The mortgage broker scrambled, removed Nguyen's wife from title on the upside down property (thank goodness she wasn't on the loan) and submitted the loan package for a third time.
However, by now the approval letter from the short sale bank had expired. The seller asked me to submit Anderson's increased offer to the bank. The bank approved Anderson.
Nguyen was devastated. His buyer's agent was mortified and angry. In retrospect, this reaction was a bit astonishing because Nguyen had initially bumped Smith out of this transaction. Now Nguyen said he couldn't somehow understand that the entire short sale was subject to short sale approval by the bank. That approval vanished when Nguyen could not perform by its expiration date. Anderson, on the other hand, the quiet and patient buyer, was delighted.
I received 3 mails in succession from the Nguyen's agent. The first threatened to sue. The second email, which arrived 5 minutes later, was on bended knee, apologizing and begging for a second chance; and the third, moments later, was pure bribery, asking if I would accept flowers, a bottle of wine or a gift certificate. (I'm not kidding.) It's not my decision to make who wins this short sale home. I'm only the short sale listing agent. I serve at the direction of the short sale seller.
Short sales are subject to lender approval. The seller canceled Nguyen's escrow. Anderson got the home.
Elizabeth Weintraub is an author, columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you.
The Short Sale Savior, by Elizabeth Weintraub, available in bookstores everywhere and at Amazon.com.
Sacramento Short Sale Agent, Elizabeth Weintraub, has the answers to your Sacramento short sale questions.
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My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice. It could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.
Who needs a diary anymore when we can document these wild stories on our blogs? I believe one day we're going to revisit these posts and say "gee, can you remember when "x" happened and we had to do "x" and then I was bribed with wine and flowers" LOL!!!
Elizabeth
That is a bizarre twist; never a dull moment.
I hear ya, Colleen. Months from now, this will be but a faint memory, but it's all here in black and white, OK, color, too. The reaction from the buyer's agent was hilarious but very sad in a way. He was clearly frantic.
Hi Tom: Nguyen didn't seem to understand what happened when the shoe was on the other foot. He bumped out a buyer, and now another buyer bumped him out, all due to the fact that short sale offers are subject to short sale bank approval. This guy's approval letter expired so the bank approved a different buyer.
Elizabeth, That is a new take on Short Sales...so much for highest & best! Thank you for sharing that!
It gave me a headache just trying to follow it! You are a better woman and Realtor than I. Our market is just now seeing a small glut of short sales, so I better get learning this stuff.
WOW! What a story Elizabeth. I'm actually going to tell that story to some of my clients who have lost out on some short sales. It just might get one of them back out. She was devasted after losing yet another (about her 10th) bidding war for a property.
Patience grasshopper is all we can say when it comes to short sales. Sometimes it is just a matter of being the last man or woman standing. If you are a renter and have time to wait it out obviously you can be a winner.
Elizabeth - I think that one of the things that would have made me most uncomfortable if I were Nguyen's agent, would be the fact that my client had made repairs prior to close of escrow.
I understand the reimbursement offered was attractive, but had I been Nguyen's agent, I would have been more comfortable exploring the use of the existing mortgage company on the property as the new lender for Nguyen. That way we could have possibly negotiated having that $10,000 repair allotment by the bank held in escrow for repairs made AFTER close of escrow.
We all have to remember that price is not the issue it is getting it closed. Too many times sellers get focused on the price and forget about the quality of the buyer. Great lesson.
Short sales can have long stories...we have one I am too tired to write....thinking about it makes me tired...suffice to say the agent and the buyers should see if there are openings at the zoo for chameleons..it's something else every 4 hours....grrrrrrr....
Susan: It makes me tired just to reiterate it.
You hit the nail on the head, Myrl. The buyer is out that money for the before-closing-repairs.
Wow I bet Neguyn is ticked. I'm glad there are no so many short sales around here. They are sometimes VERY complicated.
Elizabeth: And here I thought I could take a mental vacation from such drama by stopping by your blog for the first time n a week. My head hurts worse than it did before.
Elizabeth,
Wow, what a story, what an unpredictable scenario. I am reading it like a real suspense. This is a great lesson of what to expect from a short sale.
It's not much better up here, but at least we have no deficiency judgment to freak out the owner-occupied sellers.