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The Dark Side of Certain Short Sales
There is often a lot of anger in Sacramento short sales. Sellers can get stuck in any one of the 5 stages of a short sale, but I see a lot of them who struggle to push past the anger stage. It festers and churns, like a supervolcano underground, and it might never erupt. Unresolved anger can eat away at a seller’s inner core. That anger needs to be released, and hopefully not directed at their Sacramento short sale agent. Sometimes, I gotta duck to move out of the way of that flying fry pan.
The anger manifests itself in subtle ways that is apparent to me when I walk through their homes. I spot it in the ripped out speakers from the ceiling, the missing light pendants over the kitchen counter, the big hole in the front yard where a tree once stood. People who are not angry do not remove fixtures from a home. Fixtures don’t belong to the homeowner, they are part of the lender’s security for the loan. I also see anger in the dirt and debris left behind. Some sellers don’t even vacuum.
Why are short sale sellers so mad? They are mad because they have to do a short sale. Unfortunately, people who are this angry come to a short sale often as a last resort and not as their first option. They are mad at their boss for letting them go. They are mad at their spouse and children because they are there. They are mad at their new employer for not paying them a higher salary. They are mad at politicians, the newscasters on TV, and Chevron, Safeway, VISA and Wall Street. But most of all, they are mad at their bank.
The 5 Stages of a short sale are the same as the 5 stages of grief:
- Denial: They don’t open mail from the bank, and they ignore the late notices.
- Anger: They don’t want to live in the home anymore, just hearing their bank’s name makes them cringe.
- Negotiation: They write a hardship letter to the bank, asking for a short sale.
- Depression: They feel hopeless and helpless and out of control while waiting for short sale approval.
- Acceptance: They find a place to move into, and begin to heal after the short sale is granted.
The sellers who never move past the anger stage are often the sellers the banks reject for a short sale. They are the sellers who blame the bank for the mess they are in. If the bank never made them the loan, they wouldn’t be underwater, so it must be the fault of the bank. (It IS certainly the bank’s fault for not granting a loan modification and taking forever to eventually reject them.) If they need to provide just one more document, they absolutely will not do it, even if it means the home will go to foreclosure, and their credit rating will tank for the next 10 years.
These types are not really homeowners who should be applying for a short sale. These are homeowners who are simply stretching out the inevitable. Which is foreclosure. Deep down, they know it. And that makes them even madder.
While Elizabeth is in Cuba, we revisit older blogs published elsewhere.
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.
A Ditech Short Sale in Elk Grove That Seterus Tried to Hijack
Green Tree short sales are now Ditech short sales and not any easier.
In case you don’t know, Green Tree short sales are no more, and the company name has changed to Ditech. I predict this is not the last Ditech short sale I will see. Many real estate agents in Sacramento discovered Ditech when their borrowers dumped our local lenders and opted in for a sparkly shiny new mortgage company they found online, which on many occasions could not perform. I personally recall having several transactions held up because the Ditech mortgage guys were not familiar with our local appraisers nor how we do business in Sacramento, and it caused complications. Hopefully they are better now, but I haven’t run into a mortgage through Ditech for years.
This is a story of a short sale in Elk Grove that has so many bizarre twists, I hardly know where to start, so I will start at the beginning. I listed this home in November of 2014 and it took us 4 months to get an offer anywhere near the comparable sales. We received 4 or 5 offers, all around 80% of market value, which banks don’t take. I’ve been selling short sales for 10 years and have closed more short sales than any other agent in a 7-county area of Sacramento. That makes me the top short sale Realtor for Sacramento. I don’t know if it’s the buyer’s agents or the buyers themselves who don’t understand how short sales work, but I’ve been doing it long enough that I know better than to throw lowball offers at the bank and hope they will stick.
One Sacramento agent even admitted that’s his method of operation. Throwing crap at the wall to see if it sticks. He says he always takes the first lowball and sends it to the bank and then when it’s rejected, he know how much the bank wants, so he changes the price and puts the home back on the market. That seems so defeatist to me. Why not do your homework that you’re trained and paid to do, figure out market value (based on condition) and sell the home ONCE? That makes a lot more sense, doesn’t it?
We sent the offer and HUD to the first lender, which was good old’ Seterus, and the investor was Fannie Mae. In reviewing the file now, I see we received the payoff from Seterus a few days after we received the short sale approval letter, although the payoff was dated the day prior to the approval letter. This tells me that Seterus knew how much it was owed. Instead, it sent a short sale approval letter for $100,000 more than its payoff. Seriously. If it was owed $155,000, for example, it approved the short sale by accepting $255,000. If this makes your head hurt, it’s because the first mortgage was NOT short. I guess Seterus just found a way to collect an additional $100K or they can’t read, and I’d hate to think they can’t read their own payoff statements.
The seller had owned this property for more than 15 years. There were many refinances and a subordination refinance in the public records. The seller hadn’t made a payment in so long that we had no mortgage statements, and although requested from Seterus, we did not receive the payoff until after the short sale approval was issued. There was no way we could have accurately predicted the payoff was so low as to not make this a short sale unless we prematurely paid for a prelim, which we don’t do, and even then, we still need the beneficiary statement.
We told Seterus no thank you to the short sale and proceeded with Green Tree, which held the second loan. It took Green Tree from February to the end of July to issue the approval letter and it bumped up the price by $10,000, during which time the company morphed into Ditech and this became a Ditech short sale. Then, the buyer’s appraisal came in $10,000 less, right where the price should have been in the first place, which was the price we had originally submitted. We spent another month obtaining a revised approval from Ditech.
The Elk Grove short sale closed this week. This has been almost a year of hell for the seller but we got it done. The buyer waited almost 9 months to buy this Elk Grove short sale. They could have had a baby in that time. This is another reason to only sell the home once and to sell it to a committed buyer, if at all possible. And a listing agent’s odds and seller’s odds are increased if the buyer is willing to pay market value.
In closing, it’s interesting to note that Green Tree was fined $63 million for abusing customers. The Consumer Financial Protection Bureau and the FTC went after Green Tree for its deceptive business practices and harassment of borrowers. No joke, some of those negotiators at Green Tree would scream at us over the phone and threaten to cancel the short sale if we didn’t drop what we were doing and send in documents. My clients hated Green Tree with a passion. And now, they are Ditech.
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.
Put Sacramento Short Sales on the Market Prior to Default Notice
A Notice of Default filing starts the clock ticking on Sacramento short sales. © big stock photo
Unlike the hey days of pre-2012 in Sacramento, we are not seeing a lot of short sales in the area anymore. About 4% of all the listings in Sacramento County at the moment are active short sales, as compared to about 75% a while back. Having a small percentage of homes for sale that are underwater is good news for just about everybody, though, except that short sale seller who needs to sell her home.
In case you’re wondering, and I suspect you probably are, my own caseload of short sales has dramatically decreased, but I still manage to sell and negotiate a large number of Sacramento short sales. I thought the number was much smaller than it is, but so far this year almost 1 out of every 4 sales I’ve closed has been a short sale. It means I am still pulling in a huge chunk of the short sale business and most likely continue to rank as the best Sacramento short sale agent in town.
Even though this month my closed sales for the month of July should top $6 million, only two of those homes were short sales, and they were small price tags. It is possible that July could be my biggest month this year. One of those two sales, though, was a real struggle in West Sacramento. The main problem was the dog urine smell in the back bedroom, compounded by additional problems: a rotting pergola that needed to be removed, additional pest work that was required and a broken HVAC. Not exactly every home buyer’s dream home.
On top of this, as expected, Bank of America had threatened to release the servicing, and the investor Fannie Mae demanded a higher sales price, which I challenged because it was incredibly out-of-line. It would not appraise for the buyer’s lender. Fannie Mae agreed to reduce the sales price but it was still higher than the buyer wanted to pay, but not so high another buyer wouldn’t pay it. That’s often the secret to these negotiations.
However, the sad news is other short sales are lingering, even priced way below the comparable sales, they sit. Buyers are passing by those listings in favor of fast closings and sellers who will make repairs. Some short sales take 3 months to sell today. That’s not good news if a seller has a Notice of Default filed already.
