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The Rules for an FHA Short Sale
All short sale transactions in Sacramento, especially the FHA short sales, are handled from the perspective of the short sale agent and thus limited by that agent’s experience and education. The more an agent learns, the more an agent realizes in horror what the agent doesn’t know, or at least one would hope it works that way. But some agents take a 3-hour class and proclaim themselves to be certified short sale experts without closing any short sales.
Moreover, short sale seminar classes seem to be gearing up at the moment, even though short sales are on the decline. To sell those short sale classes, the promoters proclaim that banks want to hire short sale agents to move underwater inventory but that’s not entirely true. As long as homeowners are making payments and unlikely to default, the bank doesn’t care. Also, banks have no shortage of real estate agents at the bank’s disposal.
Agents can be such suckers. I know this because I worked in the real estate seminar business some 35 years back. That well known real estate guru is dead now.
I audited a short sale class a few days ago and was astonished at the crap thrown out. Some of the information touted as fact was completely wrong. I won’t name the class except to say that I understand agents have few places to go to get this information and, if one is starving to death, even a handful of sand tastes good.
A big deficiency exists in the FHA short sale field. I see this by the questions asked online from frightened buyers. An FHA short sale happens when the existing financing is an FHA loan and the sale at market value is underwater. HUD (Housing & Urban Development) has set forth very specific requirements and guidelines. The first is to obtain the Approval to Participate in the short sale program outlined by HUD. To get that ATP, homeowners must be first be examined and evaluated to see if they fit other foreclosure alternative programs offered through HUD.
This happens even if there are no other programs that fit that homeowner’s situation. This happens even if the homeowner can no longer live in the home because all of the interior walls have been ripped out and the plumbing stripped. After evaluation of such a situation, which sounds completely insane, then the servicer will request a variance. You just have to know the rules and follow them. The short sale guidelines make sense to HUD. The strict rules don’t have to make sense to anybody else.
FHA also offers loan modifications, for example, only to owner occupants. If a potential seller does not occupy the home, the loan modification will not be granted. No investor loan modifications. End of story.
Yet, that did not stop a homeowner who rented out his home in Sacramento from trying. Even after I sent him the particular HUD guidelines, he still hoped they might give him a loan modification. Who am I to stomp on a homeowner’s desperate attempts to keep a home? I won’t squash those dreams, even if the dream is impossible. It’s not my house. Besides, the owner, even though he was not an owner occupant and has long since moved away, still needs to be evaluated for other foreclosure alternatives.
In my most recent Bank of America FHA short sale, we waited to receive the go-ahead on the Approval to Participate before putting that Sacramento short sale on the market and obtaining a short sale offer. It is the sensible and smart way to do an FHA short sale with Bank of America. Even so, it still took another 90 days to obtain short sale approval. And I’ve been working on short sales since the market crashed in 2005. I’ve closed hundreds, more than a 120 short sales last year alone. This Sacramento short sale agent is always looking for ways to streamline the short sale process.
If you’re sitting in a FHA short sale in Sacramento that seems to be dragging out and going around in circles, you probably have a listing agent on the job who doesn’t close very many FHA short sales. Experience is everything in this business.
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.
