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Closing a Bank of America Short Sale After Two Years
It’s not really fair to call this a Bank of America short sale when in reality it is actually a Bank of America short sale with Fannie Mae as the investor, which is a different kind of animal from other types of Bank of America short sales. When Bank of America is merely the servicer, it means Fannie Mae short sales are handled differently. In fact, Fannie Mae now has its own website for submitting short sales, which tremendously expedites the process.
But the procedure and short sale process still needs to follow Fannie Mae guidelines, which at times, I realize, can be difficult for sellers and buyers to wrap their heads around. The valuation placed on some Fannie Mae properties astounds other real estate agents. I suspect it’s because we work under the premise that valuation means market value, like an appraiser would do it, but that’s not how Fannie Mae seems to work. Its valuation, I suspect, has more to do with whether it is more economically feasible to sell at its suggested valuation over being paid to do a foreclosure and, yes, banks make money on foreclosures.
This supposed simple short sale began life as a Cooperative Short Sale. I met with the sellers in August of 2012. We listed the home and signed the paperwork for the Bank of America short sale to proceed as a cooperative, with no financials, sort of a short path to a preapproval. REDC was involved as the third-party vendor, which added a bit of red tape, and what usually would take Bank of America 10 days ended up taking 45 days, but we eventually received a pre-approved price for a Cooperative Short Sale that was $80,000 over the comparable sales. Not yay for us.
That Fall 2012 Sacramento real estate market was one of the hottest markets I had seen for 7 years. We held numerous open houses that should have resulted in a half dozen offers and nothing. No nibbles. No offers. We finally accepted an offer we believed to be reasonable and submitted. It was rejected. Over the next two years, we submitted a total of 5 offers, each a little bit closer to the price Fannie Mae expected. At one point, on Thanksgiving Day, I kid you not, a guy from REDC called the sellers and threatened to close the file if the sellers didn’t immediately submit a document he suddenly wanted.
The home needed work. On top of this, the roof was shot and at end of life. This meant either we needed a buyer who would pay cash or a buyer able to obtain an FHA 203K loan. Investors called and begged us to take their offer. These buyers felt we were being obtuse and cruel but in reality, after 4 rejections from Fannie Mae, it became pretty clear even to the most dense of us that we had better the submit the offer Fannie Mae expected if we wanted to receive short sale approval.
At another point in this short sale, I made a deal with the third-party vendor hired for this Bank of America short sale and obtained verbal approval for a lower price from Fannie Mae. We submitted an offer at the slightly slower price, and Fannie Mae then promptly demanded another $5,000 on top of it. The investor walked. Over $5,000. I couldn’t believe it. This is a fabulous neighborhood in Carmichael, and many of the homes around this particular home are much larger and in better condition.
It was a little disheartening, listening to buyers after buyers yelling and screaming at me on the phone about why we refused to accept their offer. They called me names. They swore at me. They wrote mean emails about me. They insisted I was prejudiced against investors. They just could not understand that this was not my call nor my decision. They felt they knew better how short sales operate, even though they may have never dealt with a Bank of America short sale through Fannie Mae, and this Sacramento short sale agent has worked on Fannie Mae short sales for years.
We finally got to the point this summer when market value had moved up enough, even with the mounting repairs and required new roof, that a buyer who wanted to live in the home decided to make an offer. At list price. A foreclosure notice had already been filed and we were in the final 21-day countdown to a trustee’s auction. I cried, I pleaded. We then received approval from Fannie Mae on this Bank of America short sale in 18 days. It was a miracle.
And you know what’s really odd about this? This was the first time ever in which we were able to stop a trustee’s auction due to short sale approval. We were literally days from foreclosure, but once we received that short sale approval letter, all foreclosure proceedings had to cease due to the California Homeowner Bill of Rights. We were saved in the nick of time. I’ve always felt that the dual tracking portion of the law passed in 2013 was pretty useless about stopping foreclosure during a short sale because it doesn’t apply to short sales until January of 2018 (when we probably won’t need the law) unless we get short sale approval. Generally, by the time we get approval, we still have plenty of time to avoid the foreclosure, so it doesn’t matter.
But in this case, our California short sale law made all the difference in the world.
We closed today, 30 days later. See, this Sacramento real estate agent does not give up, regardless of what I have to go through to close a short sale, I hang in there and make it work for the seller. But no short sale should have to drag on for more than two years like this Fannie Mae / Bank of America short sale in Carmichael.
The Sacramento Short Sale Closing Against the Odds
This was the Sacramento short sale that closed against the odds. If it wasn’t for the fact that I knew the buyer’s agent and had faith in her abilities, this particular short sale closing might never have happened. It’s almost as though we “willed it” to a conclusion, so closing occurred. Of course, having years of experience in closing hundreds of short sales helps — there is no denying that fact — but this particular short sale presented so many unique challenges. The sellers were very cooperative, too, which made the horribleness bearable.
The problem with this particular Sacramento short sale was not the fact there were two loans between Bank of America and Green Tree. I negotiate many short sales with two loans. Moreover, Green Tree is not a problem for me like it seems to be for other agents. After years of hammering, I’ve got the process down pat and know intimately how Green Tree operates. It also wasn’t the fact that there was a SMUD lien filed against the property. I know what to do with those, too. It was the condition of the home.
This is where many Sacramento short sale agents throw in the towel.
Half of the home was remodeled and the other half was not. Further, it needed a new roof because the existing roof was beyond its useful life. Did I mention the pest work? The conundrum: The seller is not responsible for the repairs. Buyers don’t want to do any work and they don’t have any money anyway. Toss into that mix the fact the bank wanted top dollar for this home — the same sales price as for a home in excellent condition — and couple that nonsense with there is really no arguing with the bank.
Unless there is strong argument, which is rare. Arguing with a short sale bank is usually a wasted effort because the banks just don’t care. The value banks typically want rarely reflect the BPO as much as it does the bottom-line net the bank could obtain through other financial options. The bank insisted on a crazy high list price, which I eventually convinced them to reduce. The buyers offered an even lower price, but they were willing to obtain an energy efficient mortgage (which involves a little known credit) and pay for other repairs.
I trusted the buyer’s agent to perform. This is where industry experience and networking pays off. We had the perfect match in this transaction. I had the sellers who needed to sell and she had the buyers who needed to buy. Challenges be damned.
The buyers didn’t have a lot of money, and we needed to rely on first-time home buyer loans and repair loans to help them to buy this house. Their agent is a pro at navigating the waters for first-time home buyers. Getting the approval from the bank for this Sacramento short sale was the first step. The second step was renegotiation with the bank. Yes, I know this goes against all that I preach about short sales and buying the home in AS IS condition without any further renegotiations but this was a special case. It wasn’t motivated by financial gain or greed.
I developed a strategy and presented a compelling case. We obtained the price reduction. The buyers got the home of their dreams. OK, maybe it’s not the home of their dreams right now, but it will be after the new roof is installed, the sewer lines are fixed, the pest work is completed and they eventually remodel the other half of the home. Sometimes, you’ve just got to have faith in the experience of your real estate agents to pull off what seems like an impossible transaction.
Oh, I almost forgot to mention. The sellers walked out of this with about $7,500 in cash from the bank. This was a sweet short sale, despite the additional work.
Why Home Buyers Won’t Buy a Short Sale in Sacramento
Like any other home on the market today, even the few short sale homes need to be highly desirable in some way to entice a home buyer to buy a short sale in Sacramento. Price alone won’t do it because the short sale lenders will demand market value. I get emails from agents who ask if I would consider wasting my time and the seller’s time to submit garbage offers on behalf of their greedy little buyers who love to lowball, and you’ve got to wonder what planet these agents live on. As additional information, the agents might offer up the fact they’ve been successful with this approach once years ago, like anybody cares.
Oh, geez, thanks for telling me. I smack my head. Dang-nabit, I had no idea.
They might say let me tell you about my buyer. No, don’t tell me. I don’t care. I don’t want to hear about his or her motives, angles, mission. I care only if the buyers are willing to do what it takes to get the lender to approve the short sale. Will they wait for approval and not cancel? An agent asked yesterday if it was OK for the buyer to cancel after I worked my tail off to obtain the short sale approval letter, in the event there was something about the property the buyer didn’t like. Sure, I replied, but be aware that I will then drive over to that buyer’s home and slash the tires on his car. Oh, he laughed and laughed.
Wow, we really want to take that offer. The buyer sounds so dedicated.
Today’s buyers, most of them, don’t want to wait for the short sale process. If they do decide to buy a short sale, it’s because the home is unique and it’s the only one like it on the market for miles around. Other short sale buyers are those who have a home to sell, and they are are buying contingent on selling. No fuss, no muss, no risk. If the contingent home is my listing, for example, I know their home will sell because they will be realistic, so those generally work out. But there is not a flood of buyers for short sales today.
I sold a Victorian short sale home in downtown Sacramento a few days before I left for my long winter vacation early last December. I worked on that short sale while enjoying an oceanfront view and warm breezes. Everybody was happy at the inception. We submitted all of the required paperwork to both banks: to the Bank of America short sale department and Chase. Chase had recently joined Equator but was not yet in Equator for this type of Chase short sale. Before the end of January, we had HAFA short sale approval from Bank of America. Eureka!
Chase Bank, because its HELOC department wasn’t yet in Equator, dragged its feet for another 60 days, despite repeated requests and hammering. The negotiator at Bank of America refused to give us an extension on the short sale and instead insisted on starting over. An unusual shitty move when the servicing was not sold. When Bank of America re-opened the file, it somehow messed up processing it as a HAFA. A logical person would think Bank of America vendors look at the previous file, but that would be like expecting a Sacramento real estate agent to study the history in MLS of a previous listing — just ain’t gonna happen.
Despite the HUD identifying this transaction as a HAFA and the notes I routinely slipped into Equator as a reminder, nope, it was processed as a traditional. A short sale agent doesn’t ordinarily discover these types of bank screw ups until the counter is issued in Equator. The seller didn’t care about HAFA by that time.
At several points, the buyer wanted to cancel. She was tired of waiting and didn’t really understand the delays. She delivered ultimatums, which don’t work. At another time, the sellers wanted to cancel. They had moved out and no longer cared about receiving the HAFA incentive; they just wanted it closed. The opportunity to eat the negative cash flow and rent it was beginning to look attractive to the sellers. In between, neighbors called to ask if was OK for them to steal the seller’s cats and take the critters to city animal control. Like wha? My main concern was the amount of time it would take Bank of America to process this as a traditional short sale after Chase finally got its act together.
I find my way around stumbling blocks. It’s what I do. The short sale closed this week, with the original buyer happy as a clam, extremely excited and relieved. The sellers are ecstatic. They appreciated my calm demeanor and keeping them on track. Approval from both banks took 5 months. That’s unusual and a long time.
Although I have closed hundreds of short sales in Sacramento, there is never a guarantee that we can get both of the short sale banks to cooperate and issue approvals at the same time. Often issues and delays pop up, regardless of how streamlined we make the process. If something can go wrong on the other side, it often does. Patience is the key to a short sale. And buyers in Sacramento don’t have a lot of patience in today’s real estate market.
Starting Over on a HAFA Due to Chase Bank Short Sale HELOC
What does it mean to start over on a HAFA short sale through Bank of America because the HELOC department (second lien holder) at Chase Bank messed up? That’s a question that is probably lingering in the minds of many frustrated home buyers across the United States right now because if it happens in Sacramento, you can bet it happens elsewhere. Let me be clear that a Chase Bank short sale, when Chase is in first position, actually seems to run rather smoothly in Equator now, it’s just those second liens that are a royal PITA.
Why, believe it or not, sellers and buyers can start a short sale in December and still be working on it at the end of March when the Chase HELOC department finally gets around to ordering a BPO. A Sacramento short sale agent can call 3 times a week and sometimes leave several messages a day and escalate, and nobody from Chase will return the call probably because they a) know an agent will call back or b) Chase doesn’t pay them enough to give a flying fig or c) they’ll quit or get fired.
Supervisors’ emails fill up with messages and they don’t return calls, either. Hello, Julio Escobedo?It seems that half the HELOC short sale department at Chase is either out to a 3-martini lunch, on vacation or sleeping in a broom closet. I hate to say this, but we had a much easier time with Chase when it was not using Equator for these second loans. Its performance today is dismal and disappointing.
But what else is new in a short sale? I’ve been closing them for 8 years now, hundreds of short sales. Now that we have approval from Bank of America on a certain HAFA short sale and we were able to beg, borrow and steal an extra two weeks to gain a short sale extension to close escrow, no matter how many hand grenades we toss at Chase, we can’t light a fire under its feet.
Chase will amble along, waddling like a fat walrus after a big lunch, drooling fish guts down its chin.
It’s not giving up to “start over” with Bank of America on a short sale. Because Bank of America is pretty streamlined in Equator. But then it’s been working harder on short sales than Chase, and that’s evident. Bank of America can approve a short sale 2 or 3 times in the length of time it will take Chase to issue one approval letter. Chase really needs to get with the program and clean up its work ethic. We’ll get a rush on the approval process at Bank of America and probably get the second approval for this HAFA short sale before Chase has had time to tie its shoes.
See, and this is why I buy stock at Bank of America and not Chase.
Selling a Sacramento Home as a Short Sale After Bankruptcy
There is only one way to sell an underwater home in Sacramento after a bankruptcy has been discharged and finally dismissed, and that method is through a short sale. Doing a short sale after bankruptcy is a greater challenge than doing a short sale before bankruptcy. A short sale after bankruptcy is not a slam dunk, like your lawyer might have promised (lawyers don’t sell homes nor typically negotiate short sales). Sometimes, people think these abandoned homes are great bargains, but generally the banks still insist on receiving market value, and market value is subjective — especially when the home sits in ruins as compared to the surrounding homes and the bank won’t take that condition into consideration when determining value.
See, that’s the thing. People erroneously believe that a bank cares about the condition of a home, and that belief is a foolish assumption. Yes, it makes logical sense that a bank would care, so I understand why you might have formed that assumption because to presume otherwise goes against all that is sane and objective, but let’s remember, we’re talking about our financial banking institutions in the United States. Let’s get real. Banks don’t care.
I closed yesterday another Sacramento home as a short sale after bankruptcy. Bankruptcy does not release the home from the seller’s name. That title and mortgage lien(s) remain. I’m not sure why homeowners sometimes do not understand that they still need to get rid of the house after bankruptcy is over, and that the house is generally not very desirable at that point. Squatters break in. Water leaks develop. Mold can happen. Stuff breaks. And it’s generally been vacant for 6 months to a couple of years, depending on how long the bankruptcy took, and lawyers don’t enjoy a reputation for fast service.
After a home has been discharged in a bankruptcy, the lenders cannot ask a seller for financial records such as bank statements, tax returns and payroll stubs. However, that did not stop Bank of America nor Green Tree from demanding those documents, even after I informed them they are quite possibly breaking federal law. Sometimes, you have to decide on which hill you want to die, and the sellers did not want to die on the paperwork hill, so they submitted the demanded paperwork in protest.
Service Link, representing Bank of America, managed to mangle the HUD 12 ways from Sunday. We submitted various adaptions and argued and argued until Service Link finally accepted the fact that certain customary expenses are seller-paid fees in a short sale transaction. You can’t really blame them because these third-party vendors work on short sales in many other states and customs vary, although it doesn’t explain why they operate unsupervised.
Later, Green Tree came back just prior to closing and insisted that the sellers sign a letter stating they do not have to submit their paperwork because this was a short sale after bankruptcy. Of course, by then it was water under the bridge, and I honestly don’t know how this company stays in business, apart from the Peter Principle that plagues many corporate entities. Oh, wait, I hear Green Tree is under investigation by the FTC.
Fortunately, I managed to sidestep a big fight with Green Tree on the payoff. That’s another thing people don’t understand after a bankruptcy, they think the banks will rollover because the liens are worthless. I’m telling ya the banks won’t. They fully realize the fresh start sellers still require the bank’s cooperation.
Then, several months into the short sale, Bank of America — as has been its policy lately with these underwater mortgages — elected to sell the mortgage to another company, in this case, Bayview. Just as Bank of America was ready to issue the approval, whammo, it forced us to start the process over with Bayview. Did I mention I only get paid once and I get paid the same whether it’s a short sale or a regular equity sale?
Bayview then conducted its own BPO and decided the price needed to be about $25,000 higher, which it may as well have offered to burn down the house, that demand made about as much sense. Part of the “price valuations” is they have often little to do with actual value and are more about how much the bank needs to net. This is akin to a seller telling me she needs to sell at $500,000 because she needs the cash when her home is worth $300,000. Her needs in that case are not relevant and completely unobtainable.
The demand for a higher price from Bayview happened right after thugs broke into the garage, and they also swiped the AC unit, including the lockbox off the front door, along with the front door handle. There was no compensation to the buyer for that, of course, and that was a delicate situation to overcome.
The good news is we closed escrow yesterday, about 6 months after I listed this home. This was actually a fairly fast short sale after a bankruptcy. The types of problems I’ve shared with you concerning bankruptcy and short sales are very common as well. If you need an agent to sell your home after a bankruptcy, you should call your Sacramento short sale agent Elizabeth Weintraub at 916 233 6759. There is no reason to list your home until the bankruptcy has been fully completed. An order to discharge does not count; you need the case closed.
