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Another Bank of America FHA Short Sale
You can tell me the buyer is canceling the short sale, and when I’m looking out on this view, I’m only half as annoyed as I normally would be. This is the view from my balcony at the St. Regis in Bora Bora. They put up the orange cones to keep the drunken jet ski drivers from running over naked swimmers. Not that it does any good. When jet skiers get disoriented, there is no telling where they might end up. Just like buyers of short sales. Hard to say. They start out saying they want to buy a short sale but then when approval arrives, lots of them tend to freak out.
As though it’s all fun and games while they are waiting for short sale approval. They can run around and boast to friends: “Look at me, I am buying a short sale. Hey, I have a lampshade on my head.” But when it comes time to put pedal to the metal, some of them just can’t do it. Is it because they’ve had too long to think about it? In a regular escrow, they would be closed within 30 to 45 days, not sitting in limbo waiting for short sale approval. Is it because they forgot they were in escrow? It’s not like there is constant activity that they can see, unless they follow updates on my website.
In one escrow, the dreaded Bank of America FHA short sale escrow, we’ve been working on the file since April. That’s not unusual for a Bank of America FHA short sale. It’s par for the course. Other lenders can process FHA short sales in a normal time period, but that has not been the case with Bank of America. We closed 2 or 3 other B of A FHA short sales recently, and each was almost a year-long process. Because getting the approval from HUD is difficult for B of A. And by the time the bank analyzes the offer, another 4 months have passed and the ATP has expired. So, they start over. Those falling over “for sale” signs in people’s yards are due more to the lengthy process for a Bank of America FHA short sale than from buyers canceling.
Fortunately, Bank of America is moving its FHA short sales to Equator shortly. We hope this happens by its target date of February. It will be a joyful day to celebrate when that happens.
But in this particular Bank of America FHA short sale that we’ve been working on since April and just received approval on 5 days ago — well, the buyer up and canceled yesterday. The agent says it was due to the “whole house inspection” as though we need some kind of excuse. We don’t need no stinkin’ excuse. Just send the cancellation and muddle on with your life. We will sell this home again, and this time to a serious buyer. Or, so this Sacramento short sale agent continues to hope.
When the Short Sale Bank Says No
You know the people I have empathy for? Is it my inlaws stuck in Chicago or my sister and niece in Minnesota who are enjoying those not-so-balmy temperatures? Or, is it the house sitters who are taking care of our home in Land Park? Nope, it’s those buyer’s agents in Sacramento who emailed some 20 offers yesterday for a home in Elk Grove. I answered email after email late last night after we landed in Tahiti. Explaining how many offers we received and how the seller is leaning toward accepting a cash offer. But the best news I got was not the short sale approval on yet another short sale in Elk Grove (which also arrived via email), it was the fact we received an extension from CCO Mortgage for my seller who is dying.
Short sale bank CCO at first said it would issue no such extension and would, in fact, start the short sale over if we could not close by December 20th. Sometimes it does not pay to take NO for an answer. I wrote a letter to the negotiator, set forth a plea for an extension, and the “absolutely no extension declaration” turned into a yes, here is your extension!
My Elk Grove seller is not a short sale though, which is another reason that buyers are climbing all over each other to buy that home. The dilemma is should the seller take a cash offer without an appraisal contingency or a financing offer? That’s a decision she needs to make. A cash offer will probably not yield as much cash as a financed offer as buyers who choose financing will pay more. They’re not forking out hard cold cash; they are financing that price increase. Of course, if the home doesn’t appraise for a ridiculous price, it doesn’t matter what a buyer offers to pay if it won’t close due to a low appraisal.
But how many offers does a seller need? Excuse me, there seems to be a large pelican-like bird on my deck that I need to check out. This is the view I woke up to this morning. Helps to put some of these dilemmas into perspective. All I have to say is Thank You, RBS Citizens Bank . . . and I hope my Elk Grove seller makes her decision soon.
Selling Sacramento Short Sales in December
I will see you four Bank of America short sales and raise you one Wells Fargo short sale. Selling Sacramento short sales is like playing poker and winning all of the time. So far this December I have closed 5 short sales in Sacramento, six if you count an intense client whom I referred to a Sacramento short sale agent better suited to handle the more colorful characters. Before the month ends, another 6 of my short sales will close, bringing my total for the month to seven Bank of America short sales, three Wells Fargo short sales and an SLS short sale. That’s not a bad December for December being a relatively slow month, even without a partridge in a pear tree.
Most people who do a short sale can choose when to list their home as a short sale. Since there are historically fewer numbers of people who are willing to cross the desert barefoot and without water to do a short sale, it’s better to put a home like that on the market when there are larger numbers of buyers available. There will be larger numbers of buyers in January than in December.
Yes, I realize there is no inventory in Sacramento. As such, I am careful to keep my fingers out of its hot oil when I gingerly drop a home for sale into it and step away from the stove. After it’s a golden color, I scoop it up and let it cool on paper towels. If it’s not cooked all the way through, I cook it longer on one side, even if it’s a little browner, because people only see the golden side when they eat it. I’m pretty darned organized.
I’ve got my real estate predictions for 2013 completed. I expect to list a lot of homes in Sacramento this coming January and February. Probably not enough homes to meet the pent-up demand. Interest rates are extremely attractive, under 4%, and the government announced it intends to keep rates low until unemployment dips to 6.5%, which will be a very long time. But when it comes to a short sale, people can decide the best time to list a home, and that time is not around the holidays. Selling during the holidays is not really necessary for most people. Which means this Sacramento short sale agent can take a vacation. Yowsa!
Don’t think I am going hogwild off the beaten path, though, I am bringing my laptop.
Agents Who Represent Themselves on a Short Sale
Trying to buy a short sale for yourself is like yanking out your own tooth with a pair of pliers. Some people say the whole experience of a short sale reminds them of a root canal. When I was a kid, my mother used to tie a string around my tooth, and she tied the other end around a door knob. Then, she slammed the door. Sometimes, it took a couple of tries. Yikes. But it beat grabbing the pliers and doing it myself.
I don’t know of a single lawyer who would try to practice law in a field in which the lawyer had no knowledge. Yet, real estate agents try to do it all the time. In fact, when I represent lawyers for short sales — and I work with a lot of lawyers — I always suggest they get legal advice from a real estate lawyer. If a lawyer is in corporate law, she doesn’t know the ramifications of a short sale. Likewise, agents who work in residential real estate should not try to sell commercial property. It’s bad for the clients. It’s probably a violation of the Code of Ethics as well because it’s not in an agent’s clients’ best interest to hire a novice who knows nothing about the field to represent them.
The only thing that’s worse than representing a client when you should not is when that client is yourself. Because that’s just plain stupidity at the worse levels. I have an agent from southern California who is trying to write an offer on a short sale for herself. She apparently knows little about residential real estate in Sacramento, much less a short sale. She is also not a member of our Sacramento Board of REALTORS, so we are not required to reciprocate with her.
I have explained to the agent that she was missing the correct forms in her offer to make it a short sale offer. In short, the offer she dropped at my office because she doesn’t “do the computer” is not written correctly. I explained some of this to the seller when I sent it to her and suggested the seller ignore it. The offer has not closing escrow written all over it. The proposed buyer did not follow instructions in MLS because she cannot read the instructions as she is not a member. Her loan is complicated, involving several community agencies, which makes her not a good candidate for a short sale, even if her offer was written correctly, which it is not. Short sale approval letters from the banks on this particular short sale stipulate a 30-day closing, and her loans would take at least 45 days. Her preapproval letter is outdated and does not include a calculation for HOA dues, yet she is trying to buy a condo. And to keep a small commission because she has a real estate license.
One in about every 35 people in California has a real estate license. Having a real estate license does not make a person a real estate agent. You know what makes a person a real estate agent? Earning your living as a real estate agent, year after year. It’s experience.
When it comes time for my husband and me to buy another home in another area, I am certainly not planning to represent myself. I will hire an experienced local agent who works with retirees. There is just too much that could wrong. This particular real estate agent is doing herself a grave injustice trying to save a couple of bucks. She should hire an experienced Sacramento short sale agent to help her to buy a short sale. When I told her in the nicest way I could think of that she deserves her own agent, she raised her voice, threatened to call the NAACP and accused all agents in Sacramento of discrimination. What?
I wanted to say: Lady, I can’t see you over the phone. I have not seen a photo of you. So, I do not know the color of your skin and even if I did, which I don’t, it would not make any difference. Moreover, to imply that this Sacramento short sale agent would discriminate is simply preposterous. It’s completely ridiculous. Insulting. The problem is this poor woman needs help. She says she has a friend who is a real estate agent in Sacramento. I sure hope she calls him.
Why You Might Not Care About Mortgage Debt Relief
Many of my Sacramento short sale sellers are concerned about the mortgage debt relief extension, which is presently sitting at the U.S. Senate in limbo. Mortgage debt relief is the process of relieving a seller of having to pay taxes on forgiven / canceled debt. For example, if you sell a home for $100,000 and you owe $200,000, the bank is forgiving $100,000 of debt when it does a short sale or a foreclosure. Under regular IRS rules, you might be responsible for paying taxes on $100,000 of income that you did not get in your hot little hands. If you’re in a 30% tax bracket, that’s $30,000 you could owe the IRS.
At present, this relief from taxation expires at the end of this month, on December 31, 2012. There is a bill extending the relief through 2013. It stems from an original bill that was passed 5 years ago and has been extended ever since: the 2007 Mortgage Forgiveness Debt Relief Act. The big question is will it be extended again?
The bigger question should be what happens if it doesn’t? Are you affected? This is the question I would like every Sacramento area short sale seller to ask an accountant. Don’t go poking around online reading crap that may or may not be true — including this blog. I am not an accountant. I cannot give you tax advice. I am a Sacramento short sale agent. I sell homes all over a four-county area. Lots of them. More than 100 a year. But I don’t give tax advice.
Having said that, I will tell you that accountants have told me that California purchase money loans are not affected. They say it does not matter whether you close this year or next year or ten years from now, if you have a purchase money loan and you live in California, there are no taxes due on that canceled debt. Furthermore, mortgage debt relief is not a short sale exception. If you have to pay taxes for some reason on canceled debt, it applies to foreclosures as well as short sales. So, opting for foreclosure instead of doing a short sale is not going to save your butt. But don’t take it from me, ask your accountant.
Moreover, ask your accountant about insolvency exceptions. If you owe more than your assets are worth, you might be insolvent. Insolvency does not mean you are sleeping under a bridge and holding a sign saying something goofy like you will work for food when what you mean is you would like somebody to give you some money. It means your liabilities exceed your assets. Almost every short sale seller is in that boat. If you are insolvent, the government makes an exception for you.
So, before you get all excited over whether the mortgage debt relief will be extended, please, I beg of you, talk to an accountant. Doing a short sale is stressful enough without adding this little quirk to it. It might be totally unnecessary for you to stress over mortgage debt relief. Read this recent article by reporter Ken Harney in the Washington Post, after he interviewed this Sacramento short sale agent about mortgage debt relief.
