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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.
Story of an Elk Grove Short Sale With Nationstar Auction
This is an interesting allegory of an Elk Grove short sale that survived two auctions directed by Nationstar. First, let me say that the very nature of short sales can sometimes mean the listing agent will be forced to sell that home 2 or 3 times. The reason for multiple resales has nothing to do with the negotiations, sellers or listing agent. It is almost always caused by the buyers. They flake out. Cold feet. Change their minds. Find something else. Move away. Lose jobs. Indigestion. Whatever.
The first time I sold this home in Elk Grove, it was to a buyer who also had a home to sell and wanted to present a contingent offer. While there are ways to accomplish this feat, a contingent offer is not always your best bet because, if short sale banks catch wind, they tend to reject those arrangements. A smart Sacramento short sale agent realizes this. The agent found a buyer for the buyer’s home almost immediately, and this buyer entered into contract to buy the Elk Grove short sale.
Nationstar could not bring the home to auction for more than 3 months. Much of that time was spent arguing about the health of the sellers, which was dire, and their ability to survive that sort of thing. In the past, we’ve been successful with a strong defense against the Nationstar auction and could opt out, but not this time. We also had to escalate the short sale several times because of non-action on the part of Nationstar.
The buyer registered for the Nationstar auction, even though the buyer was under contract, because the buyer was worried about losing the home. Another buyer would need to pay a 5% premium to Nationstar, but a buyer under contract is exempt, so this buyer had nothing to lose by registering. Except by the time the auction rolled around, the buyer grew more anxious and nervous. Near the end of the auction period, Nationstar, we suspect, submitted a shill bid. This is a phony bid designed to encourage panic in the original buyer and result in a higher price. Until recently, this was a legal practice on behalf of Nationstar.
The shill bid by Nationstar caused the buyer to push up the price another 3% or so. The auction ended and our buyer won. We received short sale approval within a week. Shortly after entering escrow, the buyer canceled. Something about realizing the roof had to be replaced, which was always an existing issue and made clear. The buyer who was purchasing that buyer’s home was devastated and crushed because now that sale fell apart. We put the home back on the market.
See, the thing is this home was priced about $100K under its value, maybe more. It was in line with the comparable sales, which was how we could get it approved by the bank, but its actual value was considerably more. The neighborhood is high demand. End of a cul de sac, too, which is always a premium in Elk Grove. Sometimes I get these kinds of listings, but the pricing is typically geared toward what the bank will accept, which needs to match the comps.
Sure enough, an astute real estate agent came along who recognized this excellent value and put in an offer at list price for a cash investor client. While this happened, we also received a bunch of lowball offers from idiots. I don’t know why comps aren’t run at times but these are the guys whose M.O. is to throw offers at the wall to see what sticks. They don’t do their homework, so they miss out on good deals by just lowballing whatever the price seems to be.
Second time around with Nationstar took a month longer than the first time, and there was no argument about the auction. Nationstar held the auction and nobody bid. The buyer did not register for the auction. We were informed that because the buyer did not register nor bid, the short sale would start over and we would not receive an approval letter a few days later like we did the last time. Buyers should be aware that this happens. It takes longer for approval, so my suggestion is to register and bid, at a minimum, your purchase price contract amount to speed up the approval process.
On top of this, at the last minute, Nationstar decided to offer considerably less to the second lender, Bank of America, and the second bank would not budge from its demand. Bank of America said no to the offer. Ordinarily, in these situations, there are ways to bring the banks to an understanding. However, that procedure involved a lot more time and the sellers had already found a place to move. Anybody who knows me well knows my compassion but I am also astute. I don’t give away my paycheck. I work too hard. It is very rare for me to kick in cash to close a transaction, but every once in a blue moon it makes perfect sense, especially when the clients’ needs take precedence.
Many people don’t know it is against the Code of Ethics to ask a buyer’s agent to reduce the selling end commission. Yet, there are also ways to encourage a buyer’s agent to participate in a cash contribution without directly asking the agent to do it, but I decided just to pay the difference myself. It was expensive but worth it for my clients. Both of the banks allowed this hijacking. I absolutely will not pay a guy’s child support, however; and I’ve been asked, if you can believe it. But these sellers were unlikely to find another place to move that met their specific needs, the negotiator at Nationstar was not very cooperative and sometimes vanished for days, and this needed to end. It was in my power to make it end. So, I did.
Ten months of hell. Over. Clients: extremely grateful. That’s the silver lining.
