Should a Sacramento Home Buyer Cancel Escrow?

A home buyer called yesterday to ask if she could cancel her escrow, dump her buyer’s agent and become a client with the Elizabeth Weintraub Team. She was very unhappy with her present real estate agent’s performance, but I suspect that unhappiness was due more to miscommunication than inability or inexperience or monkey business. And, like many first-time home buyers in Sacramento, her escrow was a short sale. See, unless you’re a listing agent who sells hundreds of short sales — and there aren’t very many of us in Sacramento — an agent probably won’t have the answer to every single piece of drama that can pop up in a short sale. No answers = client confusion.

This buyer was concerned because HSBC had twice increased the sales price. Is this normal, you might wonder? Yes, it is. There are many reasons for a price increase during short sale negotiations. There could be several BPOs. The servicer might establish a market value that is different from the price point determined by the investor. Not to mention, prices are inching upwards in Sacramento. I closed a Roseville short sale last week that had 3 price increases during processing, and the last adjustment exceeded 10%. A short sale condo in Rancho Cordova was bumped more than 20% when a buyer balked and walked and a new buyer stepped in.

Her suspicions were aroused because the price increases were not presented to her in a formal manner — via a worksheet or letter from the bank. Instead, the listing agent had called the buyer’s agent to provide the verbal communication. The buyer felt this procedure was unprofessional. Yet, that is the procedure for most short sales. I don’t blame a buyer for being wary. I wouldn’t like it if I was simply informed that I needed to pay $10,000 more without proof from the bank nor an appraisal to justify, but that’s how short sales work.

The thing is if a buyer doesn’t want to pay it, another buyer will pay it. That’s what the bank is banking on. And the bank doesn’t care. You might think the bank cares that the home needs paint, new carpeting, the roof leaks, but I’m telling ya, the bank doesn’t give a crap.

In this particular instance, the buyer disclosed she was FHA and applying for the CHDAP program. Holy toledo, the only thing more problematic than that would be a VA buyer and, even then, it would be a tight race. In fact, a VA buyer might have an edge over a CHDAP. The basic way to close a CHDAP in a short sale is to get a short sale extension. A short sale extension is not always possible.

My advice to this buyer — after telling her I can’t give her advice because she’s in contract and under agency with another agent? My solicited advice was to stay in escrow. For heaven’s sakes, don’t cancel. She does not realize how lucky she is to be in escrow and be buying a home in Sacramento. For every buyer who wants to buy an entry-level home in Sacramento, there are 9 more who won’t be able to buy. They will get beat time and time again by cash investors or conventional buyers. Buyers would give up their eye teeth to trade places.

Welcome to our Sacramento housing market in the spring of 2013. If you’re in escrow, stay put and don’t whine.