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A Bank of America FHA Short Sale Disaster
This Bank of America short sale doesn’t compare to the Bank of America HAFA that had 25 HUDs. But we’ve had at least half that many HUDs requested already on this Bank of America FHA Short Sale. The negotiator can’t decide what he wants or needs. First it’s THIS, then it’s THAT, then it’s THIS OTHER THING and then he’s back to THIS again. I call it the HUD game. The Bank of America negotiators call it doing business in a normal fashion. It’s enough to make a Sacramento short sale agent watch FOX News. No, not really, nothing would make me that insane.
But I try to have empathy. It’s not easy being a Bank of America negotiator and being despised by so many. The clients can’t stand them and the agents aren’t faring much better. One of them accused my mild-mannered and extremely polite assistant of “bullying” when she asked why he refuses to do what he says he will do. It’s like the guy has suffered a total memory lapse, but I suspect his inability to perform is due to keeping incomplete notes. He will say one thing, and when we call him back he has no recollection of the conversation and says something else.
Unlike Alzheimer victims, the negotiators seem like they are coherent. However, on top of the poor record keeping and inconsistent behavior, is the sudden loss of files on those Bank of America FHA short sales. We have a Sacramento short sale that we started in February. By the end of March, we had approval from Citimortgage, the second lender, which changed its name a while back to One Main Financial. By the end of June, we finally received the Approval to Participate from HUD on this FHA short sale. I guess Bank of America fired the negotiator or maybe she died, hard to say, but she vanished one day. Poof. We got a new negotiator in the middle of September who informed us he had absolutely no paperwork whatsoever.
Maybe he picked up the file, glanced at it, and said: What is this garbage — and threw it into the recycling? Or, maybe the previous negotiator stuffed it in the shredder on her way out the door? I suppose it’s possible a Bank of America employee suffering from a combination of pica and low wages, driven by desperation and starvation, ate it?
This negotiator has asked us to add a dead person to the purchase contract and to all of the paperwork. The deceased person was never part of the contract. Her name was not recorded on the deed; it’s also not on the promissory note and not on the deed of trust. Somewhere along the line, in some ancient paperwork, a clerk at Bank of America typed the deceased person’s name on a file, on a piece of paper. In this negotiator’s infinite wisdom, that means putting a person who does not belong on title on all of the paperwork and on the HUD, which violates federal law (RESPA) as well as several local laws. Negotiators don’t have a real estate background. They don’t understand title insurance. They certainly don’t understand law, although I bet they dream of a career in law enforcement.
This is a $75,000 home in Sacramento. The person I feel tremendous empathy for is the seller. Next to that is the buyer who is sitting idle in escrow twiddling his thumbs. He is ready to close. His lender is ready to fund. The second lender forced the seller to pay $150 to get an extension that is good to next week. We told the second lender they cannot make the seller pay for anything in a short sale as a condition of short sale approval, according to California Civil Code 580e. One Main Financial did not care. It thumbed its nose at the seller and said: pay up or we won’t issue the extension.
Now, the negotiator at Bank of America is asking us to send him a letter from One Main Financial (the second lender) explaining how and why One Main Financial is servicing loans for Citimortgage. See, you can’t make up this stuff. As a Sacramento short sale agent, I see the most incredible crap go down at Bank of America. All one can do is send it to the Executive Office, write about it, and hope the the bank can eventually fix some of its problems.
Overall, Bank of America does a fairly good job with its short sales. But these FHA short sales leave this Sacramento short sale agent slack-jawed, shaking her head. I imagine this will close but not before we step over a few dead bodies. Forget the coffee, Bank of America could probably use some Viagra.
CITI Almost Thwarts Short Sale of East Sacramento Home
Do you know how hard it is to keep up a seller’s spirits in an East Sacramento short sale? I try very hard to make sure the first buyer we go into escrow with is the buyer we will close escrow with the first time around. I never want to say to a seller: “Look, we’ve got approval twice already, I am confident that buyer #3 will close this time.” Because sellers get exhausted when short sales drag on and on due to buyer cancellations. Not every seller has the wherewithal to hang in there. Some just give up. Throw in the towel. Walk away.
That’s why it’s important to close escrow with the first and only home buyer. It’s how we closed escrow yesterday on another East Sacramento home. This was a buyer who really fell in love with the home. Almost every agent says her buyer loves the home when the offer is presented, but buyers and agents tend to change their tune as the short sale progresses. The engagement process is often all fun and sparkly but some lose enthusiasm along the way. Not this buyer. She was a real trooper. She waited 6 months for this short sale to close. Homes in East Sacramento are worth the wait.
First, the bank decided it wanted a higher sales price. It’s the bank’s prerogative. Often when a home doesn’t move for whatever reason and we end up reducing the price, the banks put the price back where it was in the first place or close enough to it. That’s why it’s extremely important not to price an East Sacramento home too high when you’re deciding on a short sale price. But you don’t want to be too low because you might attract a buyer who can’t afford to increase her price if the bank demands it. It’s like Goldilocks: for homes in East Sacramento you want to be priced just right.
Then, when the buyer’s appraiser did her appraisal, she did not read the purchase contract. The buyer’s agent gave her a copy of the purchase contract and the price increase, but the appraiser was either too busy or she simply ignored the information. Pricing homes in East Sacramento is an art. Not every appraiser is up to snuff. Her appraisal came in at the list price and not the appraised price. It was $15,000 too low. This held up the closing while we scrambled to assemble comparable sales and push the buyer’s lender to reassess.
The second lender, Citimortgage, now One Main Financial, demanded an excessive amount to settle. Wells Fargo met most of the demand except for the last $1,200. It always seems to come down to $500 or $1,000 when we come to a standstill at the OK Corral. You gotta wonder what is wrong with these corporations that they would let a deal blow up over a few dollars, but they do and they will. I guess if you looked at $1,000 x 10,000 deals, that’s $10 million. But the buyer agreed to pay it out-of-pocket. Bless her sweet little heart.
Citimortgage had refused to extend this escrow. Because the appraisal review delayed the closing, we were past our approval letter date. By all accounts, the short sale had expired. We begged and pleaded but CITI denied our requests. They’d only given us 2 weeks in the first place, which is virtually impossible unless the buyer had moved forward on the loan as I had suggested and she, thank goodness, had complied. In the end CITI relented and gave us an extra 24 hours, which we managed to meet.
I like to examine my closings afterward to figure out what this Sacramento short sale agent can do to improve future closings. After 35-some years in the business, I still try to learn. Nothing is ever perfect. In this East Sacramento short sale, if I had changed the listed price in MLS, I could have prevented a clueless appraiser from making a mistake. I am reluctant to change a list price in the middle of an escrow just in case it falls out, but now that we have a seller’s market in Sacramento, there is really very little risk to increasing the sales price during escrow. And it just might avoid a future problem when the next appraiser screws up. It’s smart to be one step ahead at all times. That’s what I strive for.
