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Tips For Canceling a Short Sale Offer in Sacramento
Some buyer’s agents do not know that when a buyer and a seller sign a purchase offer for a short sale listing, they have entered into a binding contract to buy a home. I don’t really know why agents often treat a short sale like the red-haired stepchild, but it’s a real transaction just like any other real estate transaction. If you sign a short sale offer, you’re committed.
This means if the buyer elects to cancel after approval, a buyer can do so. The RPA contract put out by C.A.R. is written in favor of buyers. Probably because buyers sue more often than sellers. Sellers are typically happier after closing than buyers. It’s rare that a seller feels that he or she got the raw end of the stick. But buyers? Whole ‘nother story.
Some people believe that the only time a buyer cannot cancel is after all contingencies are removed, and that’s a myth. They can still cancel. Buyers can always cancel. But in that event, they could get sued because they don’t have a contractual right to cancel, although, that’s where they will argue.
If a seller does not sign a buyer’s cancellation simply out of spite, a seller can be facing a $1,000 fine. The seller has no right to ignore the cancellation, if the buyer is within the time period to cancel. But that’s after 30 days. So, you can’t really force sellers to immediately sign a cancellation for a short sale offer especially unless you’re standing over them with a sledge hammer, and no agent has the inclination to do that.
But what happens when it’s the other way around and the sellers want to dump a buyer? How is that handled? Before my sellers cancel buyers from a short sale transaction, we give them a chance. It’s the fair and equitable thing to do, even if they are not fair and equitable to us. Besides, contracts stipulate. We send them a Notice to Perform. We spell out what we want them to do, and if they don’t do it, we can unilaterally cancel that short sale offer.
However, if you as a buyer wants to cancel, you need to sign a cancellation of contract. Not a withdrawal of offer and not an addendum. Buyers sign the top and bottom portion and date it, along with escrow information to release the earnest money deposit. Buyers also need to state a reason for the cancellation. When buyers sign a short sale addendum, agreeing to wait for short sale approval, the buyer is supposed to wait during that period of time. But bottom line, if a buyer doesn’t want to buy, nobody can make ’em. I suppose it’s possible they could be sued for sending a seller to foreclosure, but that’s for lawyers to argue.
For more questions about a Sacramento short sale offer, call your Sacramento short sale agent, Elizabeth Weintraub, at 916 233 6759.
When Your Sacramento Short Sale Contract Expires
My transaction coordinator flags me when a short sale contract is about to expire. But it’s not really my place to ask the buyer’s agent to extend. As a Sacramento short sale agent who represents the seller, however, I do want to protect the seller’s interests. Generally, I will call the seller to ask if the seller wants to extend the contract with the buyer, and often the seller has no reason not to extend the purchase contract. But sometimes, for other reasons, a seller might want to cancel the contract and choose a different buyer.
What I find interesting is that buyers rarely realize their contracts are about to expire, and buyer’s agents are often in the dark as well. If an agent doesn’t sell very many short sales, an agent might not know that the short sale addendum sets the contract period. In Section 1A, the short sale addendum establishes the time frame during which a buyer and seller agree to wait for lender approval of the short sale.
It’s funny because upon contract inception, agents often miss inserting a time frame. The default, if no other number of days is entered, is 45 days. That’s laughable because very few short sales are approved in 45 days. I wonder how many short sales completed between other parties have expired by the time they close escrow? I imagine a lot. Because so many professionals tend to overlook the power of Section 1A.
Up front, buyers often balk at inserting 90 days, which is almost always my recommendation. But when those 90 days are over and the seller is about to cancel the contract, all of a sudden the buyer is willing to extend for as long as it takes.
Why don’t they just do that upfront? They wouldn’t have this problem if they put, say, 360 days, in Section 1A. It’s unlikely their contract would expire by the time they receive approval.
Sellers Who Refuse to Close a Sacramento Short Sale
Never thought I’d run across sellers who refuse to close. Sellers always want to know how long it will take for their short sale to close. From listing to closing, that average time period is 90 to 120 days. That’s because the average time for short sale approval is 60 to 90 days. Once the short sale approval letter is received, most banks give the parties another 30 days to close escrow. Every so often, a bank such as Bank of America might allow 45 days for closing, but 30 days to close escrow is about the norm.
This doesn’t mean that your particular escrow will close 30 days from short sale approval because your particular escrow closing period is defined by your Residential Purchase Agreement. Right on the first page, close to the top, there is a box that will probably be checked and the number “30” or “45” written into the space. That number could be “10” or “14.” The closing date is defined in paragraph 1 D. It can also be written into the blank line such as “10 days after bank approval.” But whatever date is agreed to as closing, it always follows the short sale approval letter. The time frame for closing begins on the date the short sale approval letter is received. In the event of dual lenders, the time frame begins when the second approval letter is received.
If the buyer needs to get a VA loan or some other type of loan that might take a few days longer, one might need to get an extension to the short sale approval letter. In other words, the parties to a short sale can close sooner than the date in the approval letter if the purchase contract so stipulates, but cannot close later than the date in the approval letter, unless the agent obtains an extension from the short sale bank.
Closing escrow after short sale approval is sometimes very stressful for sellers. Especially if short sale approval is received faster than the Sacramento short sale agent initially estimated. Lenders are unpredictable at times. There can be no rhyme nor reason why one month the approvals take 90 days and the following month, an approval arrives at 4 weeks. Approval times like this can throw a seller into hysteria. A seller might not be prepared to move, either financially, or emotionally, or both.
To be fair to all parties, though, if a seller has concerns about closing and moving, the first thing the seller should do is talk to her short sale agent about it. The last thing a seller should do is wait 3 days before closing to announce that the seller is unprepared to move. Sellers who refuse to close can cause extreme havoc in a transaction and incur legal ramifications.
If a seller needs more than one extension in a short sale, the bank is within its rights to withhold that extension. Often banks will not issue a 2nd or a 3rd short sale extension. Furthermore, the bank can cancel the short sale. A seller can’t call the bank and ask for an extension, because the seller won’t be speaking to the short sale negotiator but instead will talk to a customer service representative who is not authorized to give out that type of information — and might not be able to decipher notes in the file even if she has the ability to discuss it.
When a short sale starts over, it means several things. First, there will most likely be a new BPO completed. That means the sales price can change. Moreover, if the seller qualified for a HAFA incentive, the bank might not allow the HAFA the second time around. Disqualifying for the first HAFA is often grounds to dismiss any further HAFA actions. But in actuality, the worst that would happen is the seller would need to find a new buyer, which is the place the seller was in when the short sale first began. It’s not a big headache for sellers to refuse to close a short sale.
But it is a huge, gigantic headache for the buyer who has paid for an appraisal, paid for a home inspection, canceled utilities, transferred mail, lined up movers, packed up the house and was ready to move until the bombshell fell. It’s risky to try to buy a short sale because nobody is gonna make the seller close escrow if the seller doesn’t want to close. There is never any guarantee that the seller will close escrow.
However, it doesn’t mean a buyer doesn’t have recourse or that a buyer can’t sue.
NGR is Why Buyers Cancel a Short Sale
Buyers tend to cancel a short sale for NGR.
This Sacramento short sale agent rarely loses a short sale for any reason. Oh, sure, sometimes I will end up with a seller who pleads with me to put her out of misery and to let her home die a faster death through foreclosure, but thank goodness those situations are unusual and scarce. Most sellers want to do a short sale regardless of how painful. They are willing to pay the emotional toll to the troll known as the short sale bank negotiator at their lender’s bank.
My success rate is an open book. Anybody can go to my website and look at my closed short sale transactions for the year. Apart from all of my closed listings, visitors can also view the list of closed short sales in a separate link titled closed short sales in Sacramento. I close short sales from El Dorado County, to Yolo County, Placer County and all the way to the communities of Wilton and Galt in Sacramento. If it’s a short sale, you’ll probably find me there.
I attribute this success to 2 things. I don’t give up, so I don’t listen to the word No. And we try to qualify the buyers. To lessen the chance a buyer will cancel a short sale. A short sale is like juggling many different pieces with a future goal for everybody to all end up in the same place on a certain day, and yet each of those pieces is like a cat, wanting to go in its own direction. You want to juggle cats for a living? Welcome to the life of a Sacramento short sale agent.
We all want to reach that happy spot, the end of the rainbow. And yet, every so often a short sale ends up going back on the market, generally right after it’s been moved into pending status, upon short sale approval. When it does, buyer’s agents call me to ask why the buyer canceled. That’s a normal question but typically the answer is NGR. I’ve weeded out all of the ordinary objections upfront. After short sale approval, there is basically NGR to cancel.
Oh, but what if something is wrong? Like the furnace won’t turn on or god forbid should the bathtub fixtures not match those in the sink? Welcome to home ownership. The next house in 6 months could have something malfunction as well. You want the house, you buy it. You don’t want the house? Next.
I shot the photo on this page yesterday. It is the rainbow over Bora Bora on New Year’s Day. Welcome to 2013.
It’s Just Business, Nothing Personal
I hear some agents grumble that Elizabeth Weintraub is one tough cookie, but I am actually an extremely happy-go-lucky Sacramento real estate agent. Even though every day selling short sales is a fresh new day in hell. I look forward to it. Bring it on. Hey, ask any of my clients. They’ll tell you I am cheery almost to a fault, always anxious to help or to explain something. I suspect agents equate my toughness with my non-tolerance for purchase contract violations. I practice zero tolerance for possible breaches of contract.
For example, our purchase contracts state by default that all earnest money deposits are to go into escrow within 72 hours of the sellers’ acceptance. It’s right there in paragraph 3A1 on the first page. That means we expect the deposit to be in escrow. It doesn’t matter if it’s a short sale or a regular sale for a seller with equity. You make an offer on a home, you put your money into escrow. No exceptions. After 35-some years in this business, it’s simple: you’re a buyer or you’re not.
An agent from the city of Davis objected to this a while back. He did not want his buyer to release his deposit. Or, maybe his buyer didn’t want to release. Said they don’t do that in Davis. What? They don’t close escrow in Davis? That hasn’t been my experience. In either case, that’s not an offer we considered. Because that’s not an offer. It’s just business, nothing personal.
I don’t enjoy advising sellers that we need to cancel buyers from a purchase contract. But, if a buyer does not perform, I will suggest that the seller submit a Notice to the Buyer to Perform, and follow that up with a cancellation. It makes no sense to be in escrow with an individual who is not acting like a buyer. Another buyer could not produce his updated proof of funds last week to buy a short sale. He could not produce the document because that document did not exist. He gave us all kinds of excuses and reasons and promises. It was noise. A buzzing in my ear. T’weren’t tinnitus.
This did not mean he could not close escrow, either. By the time we received short sale approval, he probably could have found the money somewhere. In his mattress. His wife’s checking account. A deal in the back alley, maybe. But we don’t operate on wouldja, couldja, didja. If you can’t show us the money, we will cancel your short sale. It’s just business, nothing personal.
