One of the longest short sales I have ever worked on involved a horse property in Sacramento. The poor sellers were originally pushed into the transaction by an agent who promised them prices would never fall. I wish they had obtained legal advice before ever buying that rental property. They paid about $650,000 two years ago for a 3 bedroom home on 3 acres, using 100% financing, an 80/20 combo loan. All this time they had been making interest only payments and paying a negative cash flow to stay afloat, until push came to shove and they could no longer afford to borrow from VISA or MasterCard to make ends meet. By the time I met these sellers, they were on the brink of insolvency.
Enter the short sale. We sold the home for around $350,000 to a buyer who owned horses. What happens in a short sale when you have two loans? We negotiated the payoffs with both lenders. The second lender finally agreed to take $1,000 from the first mortgage holder and release the loan. However, the buyer's mortgage broker messed up and was unable to fund on time. That meant both short sale demand letters had expired, and we had to go back to the bank to obtain new letters.
The second time around, the second lender's investors decided $1,000 wasn't enough to satisfy them. They demanded $5,000. The first lender refused to give it them. We were 4 days away from closing on a transaction that had been in escrow for 9 months!
My associate at Lyon, a fabulous agent who had graduated from law school and handles the negotiations for me, was obviously distressed. It wasn't our fault the escrow didn't close on time. It wasn't the buyer's agent fault, either. So, guess who paid the additional $4,000?
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Certified HAFA Specialist
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.
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Elizabeth
I think certain lenders are different from others. Certain REO departments are alot more realistic of the loss that could occur.
The last one I did was nothing but grief and time, and the one before the guy had a first, second, and a third mortgage on his property, and was in Bankruptcy with over 50 things on the Matrix. It still went together.
We do earn our salt don't we?
Sincerely
Tom Braatz
Short sales can be hell, can't they. Sounds like you kept everyone focused. Good job!
Elizabeth - I'm sorry to hear about your bad short sale experience. I hope the next one goes much more smoothly... :)
Hi Tom, Fred and Debi: Seeing as how nobody answered the question, I'm wondering if ya'all didn't get that far before responding or if you figured I paid the lender. But no, I did not pay the lender. :)
Elizabeth, did the homeowner pay the additional $4,000? Probably not. They were cash strapped as is. I was just AMAZED in your story the drop in value from $650K to $350K. That is STUNNING!!!
Elizabeth, I didn't answer the question but certainly didn't assume you paid it. If it was the loan company's fault it didn't close, I would expect them to pay it. I would.
Sorry for not answering the first time.
Hi Gary: Yeah, you're telling me. But the comps supported the price. Still, I didn't really think we had a snowball's chance in hell of getting the short sale through but I pushed anyway. See what can happen when you try?
Hi Fred: The mortgage broker wasn't making enough in the deal to pay for dragging his feet. So, no, the mortgage broker didn't pay for it. The person who chose the mortgage broker and decided to buy the home -- the person with the cash in the deal -- the buyer paid the second lender's demands.
I am sorry Elizabeth, if I had made a mistake that cost $4,000 to fix, I would have paid it, no matter what I was making on the deal. Of course, I don't make those kind of mistakes, lol.
That's the story of the real estate agent's life. Give up some commission to make it work! But the broker will always say it is better to get a little than to get nothing. I think the buyer's agent should have helped too.
Hey Fred: You're quite the guy!
Hi Barbara: As you will note, I did NOT pay the $4,000. Do you think I'm nuts? The buyer paid it. I should point out I represented the seller.
thanks for the warning - just got a call tonight of an offer coming in on a short sale I have listed -not sure how excited I want to be :)
Elizabeth-
As you already know it is not easy to deal with two Lenders on a Short Sale. You are very lucky that the second wasn't Bank of America. Their new guidelines are 10% or they will not consider!!!!
Congratulations on your closing !!!!
Elizabeth - Sorry for not answering the question. I just figured that you paid it. Now I know that the buyer paid it. I'm glad it wasn't you... :)
Hi Thesa: The thing I've found is you can't be judgmental, even if it's second nature to you and you want to be, because you never really know what a bank will do. My first reaction has sometimes been, "What? Are you nuts?" But then the bank takes it.
Hi Yoana: That's good to know. Can't say that dealing with B of A has been my favorite short sales, though.
Hi Debi: I can see how you might have thought that. The associate who was working with me on the deal thought it had gone south and it was going to blow up in our faces. I simply looked at 2 things: Whose fault was the delay and who had the money to pay the second lender? The seller didn't have any money. The buyer's agent didn't want to and shouldn't have to kick in her portion. As the listing agent, I was already splitting our side with my associate. The first lender wasn't going to budge. The mortgage broker probably needed to make his own mortgage payment from this as I doubt he gets much business given his service record on that deal. So, that left only one person. The buyer.
The buyer was offered a different lender to work with from the beginning -- a referral from her own agent. But the buyer decided to choose her own lender, a guy without much of a track record. She had waited 9 months for this to close. She wasn't going to walk away over $4,000. And she didn't. :)
I'm assuming you and the buyers agent split the cost of the $4000. That sucks when the lenders get greedy at the end like that.
Hi Mike: Are you kidding? The buyer picked up the four grand.
Elizabeth: This is not a very inspiring story. Nine months? My God. And you had to come out of pocket to save the deal? You deserve the real estate equivalent of a purple heart.
Hi Chris: Actually, I think it IS an inspiring story. I got two sellers out from under a bad investment, and a buyer was able to purchase home t almost half its original value, and to top it off, I didn't have to kick in anything since the buyer paid it. Maybe i look for the silver lining in things, but everybody won in this situation. It was just complicated, that's all. And time consuming. But it was successful.
The second must have been HomeEq!
Anyway, I never have any issues with the buyers paying for the difference of what the first is willing to give and what the second wants. You get them a property at a great price and they are motivated enough to do so.
Thanks for sharing.
Hi Amiri Property, It wasn't HomeEq, thanks goodness. I'd remember if was them.