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Tips for Selling a Fixer Home in Sacramento as a Short Sale
Selling a fixer home in Sacramento as a short sale requires justifying repair costs.
When I initially spoke to the seller on the phone, I had suggested that she might want to move back into her home prior to initiating the short sale so we could try to qualify her for a HAFA short sale, which pays $10,000 to the seller, but that proved to be impossible once I saw the condition of the fixer home in Sacramento. My office assistant called me after entering my description of the home into MLS. Laughing, that he had never heard a Sacramento Realtor describe the home in such “honest terms.”
The description was partly for the amusement of other agents but primarily for the short sale lender. The bank tends to read the marketing comments. Plus, I’m sorta tired of agents complaining that I didn’t clearly explain the condition when I say, for example, “the bathroom is gutted.” What does that mean to them? I don’t know. The basic problem with selling a fixer home in Sacramento as a short sale is the BPO agents often just do a drive by. They don’t even look at the interior of the property because that’s too much work, evidently, for the crummy $50 the bank pays, or whatever the pittance is for a BPO. Further, even if they managed to inspect the interior, the type of agents who rely on BPO wages to support their lifestyle can’t estimate the cost to replace a roof much less the reasonable cost to adequately repair a fixer home in Sacramento.
On top of which, sometimes the investor for the loan the bank is servicing has its own minimum net guidelines, which has little to do with the actual value. Selling a fixer home in Sacramento as a short sale is a struggle all around, primarily for the Sacramento short sale agent who is pushing for an approval. Throw into the mix the abundance of lowball offers from other buyers, guided by agents who also can’t estimate repair costs in the other direction. Agents call and beg to be in back-up position on these properties and why? Why, when it will immediately sell upon fall-out to some other eager investor and, at that time, at an approved price?
When a home is truly destroyed, selling a fixer home in Sacramento as a short sale is a piece of cake to get an offer, even though it may be a struggle to close. However, when a Sacramento Realtor is selling a fixer home that is not trashed from end to end, it’s less clear how much it may cost to repair. Those homes might require rehabs more for cosmetic purposes than physical damage. This is when we often advise the seller to require the buyer to submit at least a couple of licensed contractor estimates that bridge the gap between the market value the bank will expect and its true value based on condition.
I then submit a revised CMA with the licensed contractor estimates, close-up photographs and, voila, the bank now has tangible evidence to reduce the price. To do anything else means you’re just pounding your head into the ground and hoping it will feel so good when you stop.
How A Nationstar Short Sale with Freddie Mac Closed After 6 Months
Even small children are excited to close a Nationstar short sale © Big StockPhoto
You won’t find one Sacramento Realtor in town who wants to sell a short sale home three times, but every so often, despite precautionary measures on the part of the listing agent, it can happen, and definitely was the primary cause of yet another short sale home taking 6 months to close escrow. It’s generally not the short sale banks. It’s the crummy buyers and, yes, even their buyer’s agents are often to blame for failing to vet the buyers.
We put this Nationstar short sale home on the market in mid April, during the hottest time of the year in Sacramento that one can possibly sell a home. It still took 2 months to get a list-price offer. Idiots were submitting lowballs, pushing, demanding, when the comparable sales clearly supported a higher price. Finding the right buyer takes longer this year but eventually one shows up.
When we received a list-price offer, we discovered the mortgage had recently been sold to Freddie Mac, which meant we could no longer do a HAFA short sale, which was our first choice. But it was also good news in a way, because having Freddie Mac as the investor meant that this Nationstar short sale would not move to the auction process, which often can mess up things 10 ways from Sunday. We really dislike those Nationstar auction scenarios. Many delays and they never seem to work.
Freddie Mac asked for a slightly higher price and the buyer foolishly canceled. A month later, we found another buyer and went back into escrow. That buyer never deposited funds into escrow, for some reason. The seller gave the buyer a Notice to Perform and when the buyer failed to meet the terms, the seller canceled the buyer. It was during this negotiation with Freddie Mac when we discovered that although the sales price was fine, the net was not, which meant we had to reduce the amount the second lender would receive to meet the demand.
At this time, close to the end of September, we found our third buyer. This buyer was cash, fully vetted and invested in closing. The second lender let us know it needed to net more than our revised offer of $3,000. We added the small difference to the buyer’s contribution rather than raise the price, but the first lender rejected that idea, still we had to try to for the buyer’s sake. In the end, we added the difference to the sales price and everybody now seemed excited to close except, the day of closing, both banks rejected our final HUDs.
The new arm’s-length agreements that both banks produced allowed for a rent back from the seller, which is a new twist in short sales. Rent backs used to be prohibited. The sellers needed to rent for 30 days, had deposited funds into escrow and that’s what the banks objected to, primarily because the negotiators are not really trained in how to read HUDs. The Nationstar negotiator continued to insist that the rent was part of the proceeds, when it was a deposit from the seller.
Credits, debits, the process hurts their little heads.
Good thing this was a cash transaction, and we were not required to comply with RESPA, because we moved the rent deposit to a credit on the buyer’s side of the HUD. Both banks approved the HUD, with only 45 minutes left in the day to record. Which we met. Under the wire, successfully closed another Nationstar short sale.
Closing a Rocklin Short Sale With Ocwen and PNC
This story of a short sale involves a home in Rocklin that other buyers passed over, while still others offered silly-ass verbal lowball offers, and everybody complained about the condition, like I could do anything about it. It was owned by a somewhat off-center, very charming guy who, according to his account, managed to ward off 24 trustee sales. His hardship was rock solid and he seemed to have a genuine interest in selling as a short sale, so I agreed to handle the sale for him.
I guess he had tried with some other Sacramento short sale agent but got nowhere with it. He was feeling a little leery, too, I could sense. The first thing I asked him to do was take down the bunker-style divider separating the back of the home from the front. He was reluctant because it kept his air conditioning bills low, but hey, sometimes ya gotta make a choice. Sell your home and pay a higher AC bill or not sell your home. Besides, he could always replace the army blanket after a showing.
At first I thought maybe I’d find an arsenal of army weapons or something on the other side, but it was just a television and table and a cute cat. The house was a little messy, but I could also see he had made an attempt to pick up things and clean for my visit. You’ve gotta choose your battle in a short sale. I waited while he dug through his boxes and boxes of stuff to find me the financials we needed, we signed all of the paperwork, and I shot the best photographs I could, under the circumstances.
Almost a month went by before we received a bonafide offer. When I say bonafide, I mean an offer from a buyer whose agent has promised not to write any more offers for the buyer and a buyer who has agreed to wait for short sale approval. Those are the two elements we need to close escrow. A bonafide buyer and a professional agent. The rest are moronic time-wasters. It was a really good deal for a buyer who wanted to get into an upscale neighborhood in Rocklin. I’ll bet they picked up 15% or more of equity for free.
The seller had not made a payment in 5 years. Sometimes these types of short sales result in foreclosure because the bank is tired of dinging around and decides to seize the home because it’s profitable. Contrary to what the public believes, banks make money on foreclosures. But an Ocwen short sale is a little bit different in that I believe Ocwen is still in government receivership, so we pushed the government program: HAFA. The second was PNC, often a pain in the butt for inexperienced agents to deal with who will run for the hills when they see PNC, but its loan had already been discharged through a former bankruptcy.
I figured the bank had already lost the paperwork, so I gathered the bankruptcy documents I knew they would request and a few other docs. The seller was very cooperative throughout the ordeal, which always makes my job easier. Under it all, he was really a sweet person who cared for his frog in the pond, a dog and a cat, and who just needed help. We finally received HAFA approval about 60 days later, which gave the seller $10,000.
The problem then was the seller had no credit and no money (until it closed) and no place to move.
The thing about bankruptcy, though, is it wipes the slate clean. You can’t file again for another 6 1/2 years, so people will lend you money, albeit high interest rates, but you can get it. The seller found a job, then a mobile home, sold off most of his possessions, and moved just in the nick of time. I asked him to make sure to clean the home so the buyer would not get mad at the buyer’s agent. Did NOT want to hear the buyer was upset at closing. Because buyers will the blame their buyer’s agent, even though it’s not the buyer’s agent’s fault.
This Rocklin short sale closed like a charm on Friday. The home was so clean it astonished the buyers. They could not believe how beautiful their new home appeared to them. My seller got a fresh start, a new life, and that neighborhood in Rocklin got new homeowners. That’s a good ending to any story. It makes what I do worthwhile. When nobody else will take on a troublesome short sale, this Sacramento Realtor will do it and close it.
Crazy Escrows in Sacramento Mean We Stay to the End
Crazy escrows are not uncommon in Sacramento short sales.
Of all the crazy things that could fan the flames in an escrow, this particular case I’m about to discuss was exceptional, but then many Sacramento short sales are unique. This was also a small transaction as compared to selling luxury homes in Sacramento or in Davis — but as a Sacramento Realtor, I really don’t look at the sales price and tally my potential commission or I’d never list and sell half of the properties that I do. Or, as my husband likes to point out, still much more than his paycheck.
The property itself was somewhat unusual in that deferred maintenance and dry rot was evident, among some nice upgrades. That makes it hard to appraise because some BPO agents struggle with repair issues. It’s easy when all the homes within a half mile are similar to each other like those homes in Elk Grove or Natomas, it’s quite another thing when the neighborhood is distressed and the homes are not so new.
We received a few offers during the first 2 1/2 months this home was for sale, but none at the price we needed to gain an approval from the bank. Agents seem to think we should be grateful for their buyer’s lowball offers and send them to the bank on the off chance they might get accepted, and I guess they seem to forget that we don’t work for their buyers. We work for the seller, and if we’re gonna work, by golly, we’d also like to get paid for it, however small that paycheck might be. We’re not interested in hearing why the buyers feel the home is worth less, in many cases we know what the bank expects. Meet it or you don’t go into escrow. Finally, a buyer who would occupy the home wrote an acceptable offer.
Wells Fargo sent us an approval within 8 weeks, which is a little bit longer for Wells Fargo than normal, but it was also a HAFA short sale. We still had the second lender to contend with, which wasn’t budging from its high demand and, on top of everything else and typically par for the course, vandals broke in to steal appliances and wreak havoc. The sellers handled much of the repair though their insurance company, thank goodness. Then we went through 4 or 5 rounds of proposed approvals from USAA until we were down to the last 400 bucks.
I pleaded, cried and practically wept out loud to the negotiator about the sellers’ particular medical condition. Think about the worst health thing that could possibly happen to a human being, apart from maybe cancer, and that’s what the seller was going through. Then February 1st rolled around and the 2015 HAFA short sale guidelines changed, so I resubmitted the package to Wells Fargo and requested a revised approval letter to include the $10,000 relocation incentive to the seller and to pay the second $12,000. It took Wells Fargo another month to release the revised approval letter, which was finally, finally followed by the approval from USAA.
The appraiser then requested a pest report and a pest completion. Fortunately, the buyers agents, super team that they were, stepped in to help the buyer handle it. We were all ready to fund and close when the appraiser went back to confirm the pest work was completed, and she decided, on a whim, to make the crazy escrow even crazier. She noted that the floors were buckling and presented a trip hazard. Bam, the buyer’s agent was over at the home on his knees with a belt sander, fuming and mentally cursing that appraiser, I’m sure. Who knew an appraiser was also a home inspector? There’s a special place in hell for those kinds of people. If the appraiser had a problem with the floors, why didn’t she note it in the first place instead of waiting for the funding and preventing a timely closing?
Yet, close we did. From start to finish on this short sale, over 8 long months, we dealt with hostility from other agents, rejections from the lender, vandalism, inept appraisers, repair requests for the buyer, and yet in the end we prevailed. I don’t give up. As the seller mentioned yesterday when I called to congratulate, that couple would hate to think what could have happened in some other agents’ hands.
The thing is this crazy escrow was gratifying in many ways to me. A first-time homebuyer got a great deal on her first home, and the sellers received their release of liability, plus $10,000 to help ease the transition into a new life elsewhere.
Why Buyers Waited 6 Months for a West Sacramento Short Sale
Here is an example of a short sale in West Sacramento that sold at the end of October and could not close until the middle of April. It certainly was not the buyer’s fault, even though that is usually the case. It was not the seller’s fault, either, nor either of the agent’s. It was due to the lovely combination of an Ocwen lender combined with Nationstar as the second lender with MI on top of the cake. Those Ocwen / Nationstar combo short sales can be complicated to bring the two sides together, but it is generally much easier when Ocwen is the first and Nationstar is the second than the other way around, let me tell you.
Plus, as some lenders do, and I’ve been gripping about this practice until the cows come home but no legislators seem to do anything about it, and nobody else seems to care, is the second recently attached mortgage insurance. They do it after the fact when they know the home is underwater. There are companies that ensure worthless paper, and they make a profit. Why isn’t this against the law? If for no other reason, notwithstanding the profit on another’s suffering, is that on a combo loan, a borrower is promised there will be no mortgage insurance, as an incentive to buy using a combo loan package. Then, when the borrower is hurting, underwater, and struggling, the second lender slaps on mortgage insurance, which can help to mess up their short sale?
We received approval from Ocwen on this West Sacramento short sale in December, but Nationstar held out for more money. They managed to string out the process until February, at which point I went back to Ocwen and asked them to revise the approval letter because the HAFA now fell under the new HAFA short sale guidelines. It meant that the seller would have received $3,000 as a relocation incentive under the previous guidelines, but as of February 1 is now entitled to receive up to $10,000.
To get the seller the additional $10,000, we had to go through another month or so of waiting for Ocwen to revise its approval letter. The difference of $7,000 might not seem like much in the overall scheme of things, but it makes a HUGE difference to a person trying to start over with her life.
Bottom line, in this West Sacramento short sale, I got the sellers the newly approved $10,000 incentive, Nationstar got its demands met, and we closed. We are very grateful to the buyers for their patience in this ordeal. Not every buyer will wait 6 months to buy a home. But think about the price increases during that period of time! The buyer got an excellent price and a beautiful home in West Sacramento. It can be worth it to wait for that short sale approval.
