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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.
When a Short Sale Buyer Blows Off a Nationstar Auction . . .
There are benefits to registering for a Nationstar short sale auction.
This is a story of a Nationstar short sale for which the buyer did not register during the online auction and, as a result, did not participate in the online Nationstar auction. I always advise in-contract buyers to register for the online auction and to place a bid, even if it’s the identical amount that they’ve already offered, during the last few minutes of the auction. There are advantages. First, no 5% premium applies to a buyer who is in contract with a seller to buy a short sale. Second, upon winning the bid process, Nationstar promptly issues an approval letter within the week — OK, maybe another week or so when the investor is Fannie Mae, but still.
These particular buyers did not want to participate in the online auction. OK, they don’t have to. Nationstar doesn’t force them to register nor to bid. But the consequences that happen when they don’t is the approval process starts over and can take another 3 months to obtain the approval letter.
My experience has shown that a Nationstar auction typically doesn’t get a lot of action, especially when the reserve price is set so much higher than the initial starting point. I heard that N.A.R. has stopped shill bids from Nationstar now, so that helps as well. Plus, when you have Fannie Mae as the investor, you can be fairly well assured that Fannie Mae will set a reserve price on the high side of market. But buyers don’t always listen to the listing agent’s advice.
We had already lost one buyer in September who had made an offer and then immediately reneged. Some lame excuse about his parents not wanting him to buy a home. When my seller finally entered into a purchase contract with our new buyers, it was October of last year, a few weeks before Halloween. The Nationstar auction process did not take place until the last few days of December, that quiet time between Christmas and New Years when I flew off to Vanuatu, probably the very worst time of the year for an auction. But like I mentioned, the buyer did not register for the auction.
Green Tree was the second lender, the collection agency that has made enormous profits buying bad paper. Green Tree had previously issued approval, but since Nationstar had dragged its feet on the process, that loan went to charge-off status. Now, Green Tree wanted more money. On top of this, Nationstar came back to say Fannie Mae would not approve the buyer’s closing cost credit, and raised the sales price.
All of this happened because the buyer did not bid at the auction. Good thing the buyer still wanted the property from my seller. Six months from the date of the purchase contract we closed, and the buyer had to pay a higher price, plus wrap the closing costs into the loan. The moral of this story is if you’re trying to buy a short sale and are faced with an online auction from Nationstar, you may want to register and participate. You have nothing to lose but time. And quite possibly, money.
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.
The Dangers of Hiring the Wrong Short Sale Agent in Sacramento
The best short sale agent in Sacramento is Elizabeth Weintraub.
Enjoying a reputation in the real estate industry as a Sacramento Realtor with integrity (and a person who gets the job done) has been very helpful for my clients because it means my listings carry weight. What do I mean by that? It means an agent doesn’t have to worry when he or she spots a listing with the name of Elizabeth Weintraub attached to it. By the very nature, Elizabeth Weintraub listings relatively assures buyer’s agents that their transaction will conclude without drama or a pile of complications. If that particular home is a short sale, all the better; no fear, it will likely close.
I received short sale approval on a fixer home in West Sacramento a few days ago, which I forwarded immediately to the seller. He was completely stunned that I had received the approval so quickly, within a few weeks — especially due to the fact that his short sale had been initially rejected only a few days ago. It needed one little tweak to qualify, and we submitted revised documentation that addressed the particular protocol demanded of us. Some other agent might have thrown in the towel after the rejection. I don’t take no for an answer.
The thing is some home owners are really suspicious about their lenders. They make up all sorts of stories to fit any given situation, perhaps to help them cope with the confusion and utter bewilderment often apparent at certain lending institutions. Some sellers are paranoid and believe their banks employ sabotage. Bank employees can be crafty but they’re no Robert Durst. If you haven’t seen that HBO 6-part Documentary, The Jinx, I encourage you to watch it because it will leave you feeling creepy for days, which is better than feeling your bank is out to get you.
My seller said that many agents were vying for his listing and calling him to list his home. He interviewed a handful of real estate agents but he kept coming back to my name as the best short sale agent in Sacramento. I’ve sold more short sales since 2006 than any other real estate agent in a seven-county area. This guy and his family needed a professional who would get the job done, and said he didn’t want to take any chances so he hired me, and I got his short sale approval. The seller said he did not think another agent could have done it. His situation was complicated.
Short sales are all a little complicated. Yesterday a fellow called to say he was parked outside his new home, which he found on Zillow. Well, that home is closing escrow in a few weeks, so it’s not his new home. We chatted for a while and discussed how he’s living in a rental that is a short sale and thinking about buying it. He wouldn’t tell me who listed that home but continued to insist the agent, a property manager, was a “very experienced short sale agent” because the agent, most likely, had told him that. There’s a sucker born every minute, according to PT Barnum.
Who is the lender, I asked. Did the agent tell him that with Nationstar as the lender, the home is going to an online auction where another buyer can swipe the home? Nationstar short sales are animals onto themselves. Unless the investor is Fannie Mae or Freddie Mac, that’s where Nationstar short sales go these days. Then, he admitted he had submitted an offer through the agent-slash-property manager, and was in escrow. He has a fiduciary, which means all further questions need to be directed to his agent. I can’t interfere. Our conversation ended. I doubt that guy is buying a house, though.
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.
