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Two Unexpected Reasons to do a HAFA Short Sale in Sacramento
HAFA short sales started out on the wrong foot, but over the years, they have improved. Take a Bank of America HAFA short sale. I would have said last year, please, please take it, take it and shove it where the sun doesn’t shine. They were absolutely horrible because Bank of America hired third party negotiators, none of which seemed to have a clue, and these transactions dragged on for months after agonizing months.
But now they are much better. They are so good that some lenders forgot that they do them. Who was it? Oh, yes, Nationstar told me the other day that HAFA short sales expired last December. Hello? No, they have been extended. The HAFA program has been extended to December 31, 2013. The HARP program has been extended to 2015. I would be not be astonished to see HAFA extended even further as well.
When HAFA short sales first began, homeowners wanted to do them because they gave the homeowner a release of liability without a fight. Nowadays, that reason falls to the bottom of the list because sellers are protected under California Civil Code 580. Also, homeowners were eager to do the HAFA because they would get a $3,000 relocation incentive. Today, the homeowner must occupy the home to get that incentive, and many sellers have already moved out.
So why would you want to do a HAFA short sale? For 2 really good reasons. The first is if a Notice of Default has not been filed, your credit report is supposed to reflect Paid in Full. Not Paid in Full for Less Than Agreed but Paid in Full. That’s a huge reason in itself. Notice, I didn’t say you had to be current on your mortgage, you just don’t want the Notice of Default to be filed, which means you started your short sale early enough to get that approval letter before the bank records the Notice of Default. You were proactive. You didn’t wait until the last minute and call up an agent to plead for a postponement of auction. You were smarter than that.
The second reason has to do with whether you have a hard-money loan in a junior position. Those hard-money second loans can be the downfall of your short sale if they are not handled correctly. The lenders know they have recourse through foreclosure so why would they do a short sale? Because for some, money in the hand is worth twice that in the bush. And a HAFA short sale will give them more money than any other kind of short sale. Whereas in an ordinary short sale, those lenders might receive only 6% of the unpaid principal balance, in a HAFA, the first lender can authorize payment of up to $8,500. If the principal balance is, say, $20,000, it comes down to $1,200 vs. $8,500 = no short sale vs. short sale, yes.
If you’re wondering what kind of short sale is right for you, call your Sacramento short sale agent, Elizabeth Weintraub. I’ll be happy to help you to sort through your options and negotiate that short sale for you. All fees are paid from the proceeds of sale, so why not hire the best short sale agent you can find? Call Elizabeth at 916 233 6759.
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.
REDC Threatens B of A Seller on Turkey Day
An unnamed person at Bank of America confirmed for me last week that the bank is indeed pulling its HAFA and Cooperative Short Sales in-house — which is music to any short sale agent’s ears. And not the crappy kind of music like Barry Manilow, but more like early Beatles, before Yoko Ono messed everything up. And not just to this Sacramento short sale agent, but every short sale across the nation is putting down her pumpkin-pie laden fork and giving thanks to the decision by B of A to do away with its third-party vendors like REDC for these short sales. With any kind of short sale, though, these miraculous changes don’t happen over night. As a result, we are stuck with REDC for a handful of Cooperative Short Sales still on the road to Pocatello.
I have asked negotiator, let’s call her Mao, through Equator over and over and over to clarify for us whether she is negotiating a Carmichael short sale as a Cooperative Short Sale because everything about this particular short sale has gone sideways. It’s not being handled at all like a regular Cooperative Short Sale. This negotiator has ignored all questions. Then, on the day before Thanksgiving, she gave us 24 hours to send her financials or she would close the file.
24 hours on Thanksgiving Day!
Yes, on Thanksgiving Day, instead of celebrating with his family, a seller scrambled to pull together financial documents he was promised he did not need to submit. I suspect part of this request is due to the fact that Fannie Mae changed its guidelines on November 1. But even so, it is inexcusable that a representative for Bank of America would purposely cause a borrower, a client of Bank of America, such grief on Thanksgiving. This negotiator has continued to ignore requests, too.
I will say, Mao, do you realize this is a preapproved Cooperative Short Sale? And she will say: Remove the incentive from the HUD. Again: Mao, are we on the same page that this is a preapproved Cooperative Short Sale? Instead, she will ask how much the seller is willing to contribute. She outta lay off the eggnog.
It’s a good thing that Bank of America is getting rid of REDC. It’s just a shame it’s taking them so long to pull the plug.
Selling a Rental Home With a Tenant
Selling a rental home with a tenant is often a PITA. It’s not that I am anti-tenant because many of my short sale clients in Sacramento have turned into temporary tenants. In fact, I myself, in my own crazy life, was many years ago, a tenant. It’s that I am pro-Sacramento real estate ownership. Which is not all that together surprising given the fact that I am a Sacramento real estate broker whose living depends on buying and selling homes, which are mostly occupied by owners. It’s why the National Association of REALTORS is so deadset against the banks bundling truckloads of once owner-occupied homes and selling them in bulk to investors. It dilutes home ownership in neighborhoods. When blocks of owner occupied homes turn into rentals, pride of ownership dissipates and property values tend to diminish.
Still, that doesn’t stop some tenants from behaving as though the home they occupy belongs to them and not to the landlord. I’ve got a Sacramento listing in which the tenants have pretty much trashed the home. It looks like a teenager lives there. Crap from one end to the other. They have also acquired a couple of pets, which are not allowed in their lease. See, this is yet another reason that I am not a landlord. I would hate to tell a person they could not enjoy the company of a pet if he or she wanted to adopt.
The seller is pretty close to closing escrow and we received short sale approval from the bank. This means it’s time for the buyer to do a home inspection. Somehow, the tenants believe they can choose the date and, because the home inspection time period falls outside of a time that the tenants deem to be convenient, that it is the tenant’s right to louse up the seller’s transaction. They don’t want to give the landlord access to the home. They are talking about changing the locks. They accused the owner of purposely putting the home on the market at the wrong time for the tenants. They say they do not trust the landlord to enter her own home. Wha? See? You can’t make this stuff up.
I offer yet another valid reason why many real estate agents are in favor of selling a rental home as a vacant home. The government, in its infinite wisdom, has offered the tenants $3,000 in this HAFA short sale to cooperate. That doesn’t ensure cooperation, though. The fact the new owner will become their landlord doesn’t seem to mean much, either.
Fortunately, not all tenants behave in this manner. I just closed a short sale in the Pocket that was occupied by one of the loveliest tenants I have ever had the pleasure to meet. Robin was polite and sweet. She kept the home immaculate, cooperated with showings and cleaned the home from top to bottom when she moved. Everybody in that transaction would have moved heaven and earth to accommodate Robin’s wishes.
Rest assured, however, that if you need to evict, your Sacramento real estate agent will wait for you. No future sale is that urgent. Think about this before you put your home on the market. If your future buyer will be an investor, selling a home with a tenant in place can be advantageous, but it’s not if the tenant is the tenant from hell. If your future buyer is an owner occupant — and remember that home owners tend to pay more than an investor will pay — a tenant in place is probably not your best move.
How to Get $10 a Day for a B of A HAFA Short Sale
We just closed a Bank of America HAFA short sale yesterday that had started in January. This was my second Bank of America HAFA short sale closing this month. The one that closed last week was much worse by comparison. In this particular HAFA, I was fortunate to represent an extremely detail-oriented seller who had completed all of her paperwork immaculately and upon receipt. This escrow should have flowed just like clockwork, yet it took 10 months to close. Within 30 days of opening the file in Equator, we had approval from the second lender, Green Tree, and all documentation submitted and verified, including two completed BPOs. Still, it took 10 months.
By the time Bank of America gave us its first B of A HAFA short sale approval in May, the approval at Green Tree had expired. Despite our pleas, Green Tree closed the file. We reopened the file at Green Tree and started over. There were the usual battles at Green Tree: calling the seller at work, harassing the seller for payment, threats of short sale charge off, and finally we said: fine, send the file to charge off. See, this is the thing — Green Tree can reopen and re-approve a file in 2 to 3 weeks, what it takes Bank of America 3 to 4 months to do.
To add to the horrors, Bank of America then abruptly closed the file early July. It was a mistake. We had asked for an extension but no, they closed the file. We tried to reverse the soft decline, Tweeted the Social Media Team, escalated the file to the Executive Office, but to no avail. Of course, by this time, Green Tree approved the short sale a second time, while we started the process over with Bank of America.
Bank of America assigned an escalation specialist to the file. This negotiator managed to get approval two months later, insisting her performance was perfectly satisfactory. You’re telling me that a HAFA initiated in January and closing in October is perfectly satisfactory? This is why many sellers would rather poke out their eyeballs than do a Bank of America HAFA short sale. The only benefit to a seller is that $3,000 payment. Which worked out to a return of $10 a day.
I reflect on this and wonder what we could have possibly done differently. The answer I come up with is not to have applied for a B of A HAFA short sale at Bank of America. But when a seller insists on a HAFA, that’s what I do. It’s not my decision to make. This particular seller figured she had 10 months to wait, so it didn’t matter. As long as she closed by the end of the year, she was satisfied, but I wouldn’t go so far as to say she was happy about it.
The other element in this transaction was the buyer. The extremely patient, dedicated and committed buyer. We selected the right buyer, which is always key to a successful closing. It could have been much, much worse. I could have had to sell this Elk Grove short sale three times instead of only once.
As an experienced Sacramento short sale agent, I have been closing Bank of America HAFA short sales for a long time. I am Equator Platinum Certified and a Certified HAFA Specialist. If you absolutely want to do a HAFA short sale through Bank of America, I doubt there is much I haven’t seen, and I’ll be happy to help you close it. Just be forewarned.
