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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.
HAFA Short Sale Guidelines for 2015 To Pay Sellers $10,000
As if we needed a new incentive to lure the last rush of Sacramento short sale sellers into the arms of HAFA, the $10,000 cash at closing incentive should do the trick. It’s true, effective February 1, 2015, every short sale governed by HAFA is eligible for up to $10,000 as a relocation incentive to the seller. Ten large ones is the new number in HAFA short sale guidelines for 2015.
The other bell and whistle thrown into the mix is an increase in the maximum payment now allowed to second lien holders. Providing that lenders have not set an aggregated cap on the payment, they can collect up to $12,000. For the Green Tree short sales, PNC short sales and USAA short sales, that is welcome news, especially for those hard-money loans. It makes doing a short sale, including the investor incentive payouts behind-the-scenes, even more attractive to a junior short sale lender.
The lingering question is where will these short sale sellers come from? There has been a big fallout of short sales and the inventory has dwindled. Whereas a few years ago, I might have handled 70 listings at any given time, my short sale inventory has dropped to an amount I can count on one hand. Most agents don’t do any short sales at all these days. Because everybody who was underwater who should have done a short sale has already done a short sale or their home is right side up again . . . except, except for those who put a gun to their head and didn’t pull the trigger . . . until now.
I’m talking about those many loan modifications that were doomed to fail from the get-go. That’s the new crop of Sacramento short sales. Homeowners who wanted to avoid the short sale and elected to stay in the home by modifying a loan payment to an adjustable rate mortgage. Many loan mods adjust after the 5-year mark. Well, for many, 5 years is here NOW, and they still can’t afford a mortgage payment increase. That’s where the new short sales are originating. The switch from a loan mod to a short sale is upon us.
In addition to struggling to make mortgage payments, the condition of the home might have been neglected for a while. Of course, banks will still want market value, and they probably won’t take poor condition into consideration, which means short sales will continue to be a hassle for the uninitiated. But at least they now give a seller an incentive to get rid of the property for once and for all, through a short sale. Providing we can find a buyer who wants it.
That will be the kicker. If a buyer doesn’t have to buy a short sale, a buyer probably will gravitate toward some other home to buy. My prediction is short sales will take much longer to move, and the wait will be long. It will be the wait to find a buyer. Not the wait for the HAFA short sale. For a Sacramento short sale agent and her seller, a HAFA short sale is almost always the preferred type of short sale because HAFA has its act together now, after all these years.
