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Elizabeth Weintraub
Switching Sacramento Short Sale Agents
Does it take two to Tango to cancel a Sacramento short sale contract and switch short sale agents? Depends on the circumstances. It is possible to cancel a short sale contract without signatures from both the buyer and the seller. As a Sacramento short sale agent, on occasion, I have advised my sellers to cancel a non-performing buyer when the buyer has resisted cancellation and repeatedly refused to perform. On the other hand, if a buyer is agreeable to the terms and conditions of the contract, one can’t really kick the buyer out of the contract for no reason, especially if the buyer is clinging by her bloody fingernails to the door frame.
Buyers have certain rights in a purchase contract. Sometimes, the parties to a short sale get confused between the rights of a listing agent, for example, and the rights of a buyer in a purchase contract. A listing agreement is not a purchase contract. These are 2 separate documents. The common element in both, of course, is the seller. The seller signs a listing agreement with the listing agent, but that agreement does not really involve the buyer. The seller also signs a purchase contract with a buyer, which does not really involve the listing agent. If a seller cancels a short sale, a seller needs to cancel both the listing agreement and the purchase contract. Therein lies a possible complication.
Without a listing agreement in place, the buyer’s agent might not be entitled to a commission. However, the buyer and the seller can be still bound to each other through the purchase contract. If the buyer has not breached the contract and desires to move forward, it can cause problems if the seller wants to cancel. However, it is unlikely a court would force a seller who does not want to short sale to short sale. A short sale is a voluntary action. It’s another story, though, if the seller wants to sell to a different buyer. This is why it’s advisable for all parties to obtain legal advice in the event of a contested cancellation.
Sometimes, a seller comes to me and asks me to pick up a failed short sale and list that short sale. For whatever reason, the previous Sacramento short sale agent failed to close the short sale. It’s more common than you would think, as there are agents who will list a short sale who have never sold a short sale. When switching short sale agents, it’s important to ensure the previous agent has no claim to a previous contract with an old buyer, particularly if this old buyer might want to pursue a new purchase contract. It’s also imperative that there are no existing purchase contracts on the table. Both the seller and the previous listing agent must sign mutual cancellation instructions. The listing must be removed from MLS.
When a seller has canceled the listing agreement, canceled the purchase contract and has no listing entered into MLS, then I am most likely happy to take on that Sacramento short sale and get it closed. But please don’t call me in the middle of your transaction and ask for advice when I do not represent you as your Sacramento short sale agent. In that event, I am not allowed to help you.
It’s not that I am purposely being cruel or obstinate — I sense your feeling of desperation — but the REALTOR Code of Ethics says I cannot interfere in another agent’s transaction. I am not a lawyer. I cannot give legal advice. But I can and do close many Sacramento short sales.
How Mortgage Insurance Sneaks Into a Short Sale
Think you don’t have mortgage insurance? Think again. Mortgage insurance is one of the biggest problems plaguing short sales in Sacramento and across the country these days. If your home is underwater, you can have mortgage insurance and not know it. At any time, your mortgage lender can plop private mortgage insurance on your home without your knowledge nor your permission. How do they get away with it? Your lender can pay for this coverage out of its own pocket. That’s why the lender doesn’t need your permission. Because you’re not paying for mortgage insurance. Not out of pocket, anyway. You pay for it in other ways.
Doesn’t it strike you a bit odd that there is a marketplace for this kind of insurance? You might scratch your head and wonder: how are they making money? Well, part of the way they make money is for the mortgage lender to buy an interest in the private mortgage insurance company. I know it kinda sounds like they are in bed with the mortgage insurance company, and you know what? They are. And it’s perfectly legal. Isn’t this like the coolest investment idea ever? Not! But it’s going on, and it’s happening right under your nose, and probably it’s happening to your own house. As a Sacramento short sale agent, I see this more often than not.
Say you’ve got House A in Sacramento that is worth $100,000, but it has a mortgage that is serviced and owned by Big Fat Bank. That mortgage balance is, say, $300,000. Big Fat Bank doesn’t want to tell its investors that much of the assets listed on Big Fat Bank’s asset sheet are worth 30 to 50 cents on the dollar. Because that would make Big Fat Bank’s stock worth less. If Bank Fat Bank isn’t worth what Big Fat Bank says it is, then investors might take their dollars out of Big Fat Bank and Big Fat Bank might collapse.
So, Big Fat Bank buys an interest in, say, Itsy Bitsy Mortgage Insurance. It asks Itsy Bitsy Mortgage Insurance to write an insurance policy on House A, insuring a portion of that $300,000 in the event of loss. Big Fat Bank writes off the insurance premiums it pays to Itsby Bitsy Mortgage Insurance, and part of those insurance premiums are rebated to Big Fat Bank. Not only that, but when House A goes belly up, Itsby Bitsy makes money even though it must pay out to Big Fat Bank. And Big Fat Bank makes money.
Everybody is happy.
Unless the seller of House A is trying to do a short sale. Then, not only must Big Fat Bank approve the short sale, but so must Itsy Bitsy Mortgage Insurance. Suddenly, there is another player in the short sale, another layer to the process, and Itsy Bitsy Mortgage Insurance might not approve the short sale. Or, Itsby Bitsy might demand a payoff from the seller of House A or from another party to the short sale. Aren’t you glad you chose Itsy Bitsy? Oh, wait. You didn’t.
But even if Itsby Bitsy Mortgage Insurance has to pay Big Fat Bank, due to a loss suffered by Big Fat Bank in a short sale, Itsby Bitsy still makes money and so does Big Fat Bank. Hey, this is America.
Auditing a Bank of America FHA Short Sale
If you think a Bank of America FHA short sale is a nightmarish experience, consider auditing the file. Bank of America negotiators who work with FHA loans slated for short sale routinely audit those HUD files before submitting the file to Quality Assurance. This is where the file gets held up or set aside to rot in a pile of forgotten paperwork. Because I am betting that 9 times out of 10 those files are incomplete or wrong. This is not necessarily the fault of the negotiator at Bank of America as much as it is the fault of the Sacramento short sale agent.
I know you didn’t think I would say that. But I see the offers that come in on my Sacramento short sales, so I know the mistakes that are made. Logic has it that if there are that many mistakes in a purchase offer, imagine some of those negotiations. Agents are not known, to be kind about it, for their paperwork skills.
You might say but wait, Elizabeth Weintraub, you are a Sacramento short sale agent. Are YOU known for your paperwork skills? Actually, I am. Because once upon a time in a faraway land I was a Certified Escrow Officer. Those skills are very helpful to me in processing and negotiating Sacramento short sales.
So, this morning, I audited a file on behalf of Bank of America. I am not waiting for the negotiator to tell me what is missing. I have closed so many FHA short sales that I know what’s required and could probably recite it in my sleep. There are clauses that must be contained in the purchase contract. The address must be spelled out on every single document and complete. All parties need to be in contract with no expirations regarding terms or conditions. Those are just the simple things. There are also more complicated things.
I am presently working on a file in which the deceased mother of the seller was once noted by mistake on a promissory note. No doubt caused by a loan processor somewhere and not caught by an escrow officer. The mother was not on the mortgage. She was never on the title. She had no interest in this property, but a paperwork nightmare was created when her name showed up typed on a promissory note. The problem that is caused is the bank can’t issue approval without the execution of documents by a person who is no longer on the face of this earth. Bank of America wants the deceased’s name on the documents and the deceased to sign off. Unfortunately, the HUD cannot reflect a person’s name who is not on title. See the dilemma?
But this why you can rely on a Sacramento short sale agent who was once an escrow officer. I drew an addendum to fix the mistakes made by the negotiator from Bank of America and submitted the addendum for signature this morning. I’m not waiting for the negotiator to discover his own mistakes. And that’s what makes the difference between a Sacramento short sale that closes and a short sale that falls into the abyss.
The Eddie Izzard of Short Sales
This is like the Eddie Izzard of short sale stories, a Chase Bank short sale in Rancho Cordova. I mention Eddie Izzard because we went to Mondavi to see him last night. He is such a hilarious performer. We were all of 3 people, my husband says, who watched The Riches and felt so grossly disappointed when the show was canceled on FX. It wasn’t fair. Eddie Izzard and Minnie Driver sucked you in, captivated, entertained and then tossed you to the curb like a dead rat they grew tired of torturing. Some short sales are like that, too. Except short sales are not available at Netflix.
We had made a dinner reservation before the show through Open Table at Morton’s. Only because Morton’s had sent me a postcard showcasing filet mignon paired with Australian lobster tail — ah, the power of four-color marketing. Ah, the power of discount pricing at $49.95. I might be the best Sacramento short sale agent in Northern California, but I can’t pass up a deal. I did, however, manage a few bites of my steak before my husband asked if it was possible that our server had mixed them up. Sure enough, he had the medium rare while I was left thinking that perhaps Morton’s simply did not know how to prepare a medium-rare steak and maybe I should send it back. Mine was definitely medium.
The had switched our steaks by mistake. My husband prefers medium, while I like mine pretty much dripping in blood, just like my trustee auctions. Actually, we had postponed this particular trustee auction at least 8 times. It’s enough of a hassle to postpone an auction once. We started the Chase Bank short sale in February. My seller called to say she had just canceled her listing because her previous short sale agent could not manage to negotiate her short sale. This was a Chase short sale in which Chase had preapproved the seller and offered her $25,000 to do a short sale.
Yes, this Chase Bank short sale offered $25,000 in cash in hand at closing to sell a $95,000 home in Rancho Cordova. Sounds pretty incredible, doesn’t it? Almost as absurd as the fact that Morton’s, an establishment known for excellence, could manage to mixup our steaks. But life is often weirder than it seems.
The problem with cash in a short sale is always the second lender. If there is a second lender. Because no second lender wants to take it in the shorts and let a seller walk away with cash when they get jack crap. Chase Bank has its reasons for wanting to give $25,000 to the seller. Don’t ask me why or I’d have to kill you. Trying to talk Chase Bank out of wanting to give $25,000 to the seller is almost as difficult as trying to talk the second lender into letting the seller have the $25,000. It’s a damned if you do and damned if you don’t.
I sold this Rancho Cordova short sale twice, too. The first short sale buyer walked away after two months and just before approval. That’s not unusual. But the second buyer hung in there, and we closed escrow yesterday. The seller ended up with $3,000 in cash and no foreclosure. Yay. Nine months to close this Rancho Cordova short sale. You can get pregnant and deliver a baby in 9 months! But I never give up. Just like Eddie Izzard, I keep on doing my thing. We’re better off for it.
When the Short Sale Buyer Walks Away
I don’t know why they call it walking away in a short sale. When a short sale cancels, the buyer doesn’t always walk. Sometimes, the buyer is kicked out of the short sale, booted to the curb. Sometimes the buyer runs away because the buyer is frightened. Sometimes a buyer just can’t get financing together so the buyer can’t close. But buyers rarely walk. They don’t take a leisurely stroll. They don’t wait patiently with you for a green light like some little old lady who needs help hobbling across the street. They bolt. Like cotton.
A few days ago a buyer’s agent sent this Sacramento short sale agent an email to say her buyers were canceling. Those weren’t the words she used — because she did not understand that her buyers were canceling — but that’s exactly what was happening. She just didn’t seem to know it, for whatever reason.
You can tell a buyer she is purchasing a short sale in “as is” condition but that information often falls on deaf ears. People think they are special and their situations are special, but the truth is they are not. When a buyer signs an “as is” addendum, which all buyers do for a Bank of America short sale, this means regardless of what a buyer finds in a home inspection, there are no renegotiations. None. No price reductions. No discounts. Not only is that because of the “as is” addendum, but the market dictates it as well. That’s because another buyer will buy the home in its “as is” condition. In a heart beat. The bank knows it. I know it.
The only person who doesn’t seem to know it is the buyer. Oh, and the buyer’s agent.
But the really good thing about Equator and a Bank of America short sale is a new buyer can be slipped into the old buyer’s position. It’s called a soft decline. Providing that the negotiator at Bank of America doesn’t press the wrong button and close out the file by mistake, which has been known to happen, the new buyer approval doesn’t take very long. Within 30 days, the new buyer should receive short sale approval.
So, if your short sale buyer walks away, don’t despair. It’s not a huge deal in the overall scheme of things and your Sacramento short sale. In fact, walking away is a fairly common occurrence.
