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Giving a Sacramento Short Sale Guarantee
We have buyers right now who want us to guarantee that their Sacramento short sale will close. They have short sale approval from the lender, they are paying cash, they have completed all of their investigations. The only people who would most likely prevent this transaction from closing is themselves, yet they would like us to guarantee their performance.
These are the types of buyers who early on might insist upon an authorization letter so they can talk to the bank. That’s not gonna happen. They are cautious every step of the way. Well, I might want to talk to the Pope, too, but it ain’t gonna happen.
What we have here are buyers who want to remove all risk from a transaction. There is no way to remove all risk. One can minimize risk and manage risk, but not prevent it entirely.
There are no guarantees in real estate and even fewer in a Sacramento short sale. Only odds. The likelihood is this Sacramento short sale will close without a hitch, and hopefully the buyers won’t do anything to screw it up. But I’ve seen it all as a Sacramento short sale agent and nothing really would surprise me anymore.
Is That Sacramento Short Sale Really a Short Sale?
Home buyers in Sacramento need to be very careful when they attempt to buy a Sacramento short sale. Buyers need to differentiate between the short sales that will close and the short sales that sport a sign in the yard but are not really a short sale. Not every short sale that is offered for sale as a short sale is actually a short sale. That’s been a problem since Day 1 back in 2005, and it continues to plague us even now.
Because short sales have become such a hot commodity, many real estate agents have taken a few hours training and decided that they are now “short-sale certified,” which in their minds makes them a short sale expert, even if they have never closed a short sale. Not every real estate agent is faring well in this Sacramento seller’s market, especially if they don’t have any listings. Listings tend to rule. So, some agents are jumping on the short sale bandwagon and throwing homes on the market in desperation without any knowledge of whether these homes are likely to be approved as a short sale. They figure they took a class, so the transaction will close, and by the time you, the unsuspecting home buyer finds this out, you will have waited 3 to 6 months for nothing.
There are also a group of agents who used to sell REOs for the banks who have switched over to cold-calling sellers from the lists the banks provide to them. Banks give the agents a list of homeowners who are delinquent and underwater. Then they turn the agents loose on these unsuspecting homeowners to try to hammer these people into trying to do a short sale. If an agent calls a homeowner out of the blue and pushes that homeowner to list with her as a short sale, that homeowner might want to explore other options and find her own Sacramento short sale agent. She might not want to choose an agent working with the bank, or an agent who has no experience.
You may ask: how can you tell if a short sale will close? There are many ways; here, I will give you an actual, “real world” example. A few days ago a woman called me to ask about a short sale in the Pocket. She wanted to buy it. I pulled up the listing in MLS and then ran the listing agent’s ID number for the past 6 months to see what kind of activity and closings the listing agent has done. Turns out this particular Sacramento short sale agent had closed one short sale in that period of time. That was a red flag.
The next thing I did was look at the listing itself. The photos were horrible and very dark. The property was obviously vacant. That makes it unlikely that the short sale would be a HAFA because there would be no incentive to the sellers. I looked at when the present owners bought the property. They had refinanced it since then and pulled out cash. That’s a bad sign for a short sale. Not only that, but there were two loans, and the second loan was National City.
That means that PNC is the lender because PNC took over National City loans. It’s a hard-money second, and PNC knows that if the home goes to foreclosure, it can personally pursue the seller for the full amount of its unpaid balance. There is no incentive for PNC to grant this short sale. Now, PNC might elect to do it if the seller paid down part of its loan, but since the sellers have already abandoned the property, it is very unlikely that they would be willing to pay down the loan balance just to do a short sale. When they moved out, the sentiment was probably that it was OK if the home went to foreclosure.
I’ve worked with PNC a lot, and I know what it demands when there is a hard-money second. Since this is not a HAFA, PNC is also very unlikely to take 6% of the unpaid balance, which is probably what the first would offer it.
In short, this short sale is not a short sale. It’s not going to close. I would bet my 39-year career on it going to foreclosure. There are just too many things against it.
You can ask your agent to look up this kind of information for you before you put in an offer on a short sale. Remember, your first red flag is whether the listing agent has sold very many short sales.
Should You Do a Loan Modification or a Sacramento Short Sale?
Many underwater sellers in Sacramento, by 2013, have most likely tried to do a loan modification or have successfully closed on a short sale. I suspect most of the extreme financial hardships have been resolved and the strategic short sales have been executed or denied by this late date, because many homes have been underwater in Sacramento since 2005-2006. That was the first wave. The next big decline happened in 2008.
Five to 9 years is a long time to struggle with an underwater home. Because of today’s marketplace in Sacramento, some of the borderline underwater homes are turning into equity sales. However, if your home value has fallen by 50% or more, I don’t see any hope for you. Can’t sugar coat this. You won’t regain that equity in my lifetime. There are basically 3 ways out and with few exceptions, only the short sale is the permanent solution.
You either do a HARP refinance (if your loan is Fannie Mae or Freddie Mac) a loan modification or a short sale. If you do a loan modification or a refinance (with the refinance really being a loan mod in disguise), the only thing that really makes sense is if the lender will reduce your principal balance, erase a good chunk of it. Because if not, you’re simply reaffirming a humongous debt that you’ll never ever repay unless you live in that house until you die. And even then, you’ll pay twice as much as you needed to pay. Most banks will NOT reduce a principal balance.
You might wonder why would banks give you a HARP refinance or a loan modification if it wasn’t a good deal for you? Because they don’t give a crap and they want to stop their own bleeding. Banks don’t really care about you. They care about their stockholders and whether the government will continue to sue them, and all sorts of others things, but not you.
You also can’t pursue a loan modification when you’re trying to do a short sale. I had an investor client start out to do an FHA short sale about 6 months ago. We were getting him preapproved for the ATP before going on the market. Mid-stream, ?he decided he wanted to do a full-blown loan modification, so we had to drop the short sale. Not only that, but he was advised not to do the loan modification because he did not live in the property, and FHA will not do a loan modification for a homeowner who does not reside in the home. I sent the homeowner the HUD guidelines, which clearly stated such, but he wanted a miracle and was hoping for something magical to happen. I understand that homeowners are confused and directionless at times.
His loan modification was denied, of course. But getting that denial did make it easier to get him the Approval to Participate in an FHA short sale. I am working with several other sellers who were granted loan modifications and are now waking up to the fact that they will never get out from being underwater. They will always owe all of that money! And some of them no longer can afford to pay the minimum or reduced payments under the loan modification.
The Rip Van Winkle loan modifiers in Sacramento are waking up. That loan modification is not a very good deal for you, is it?
If you’ve got a loan modification that is cause for concern and you want to dump that home so you can buy the same type of home again in two years and be done with this mess, call me. I can put an end to this suffering. I’ve been doing Sacramento short sales since 2006 and have closed hundreds. Last year, I sold $32 million. Call Elizabeth Weintraub at 916.233.6759.
Sacramento Short Sale Approval Delays Can Raise the Sales Price
I wrote on Sunday about how I listed this Sacramento short sale from a remote corner in the world, using a spotty internet connection at Rangiroa Atoll during Christmas vacation. I also mentioned the fact that if a short sale takes too long to negotiate or a Sacramento short sale agent has to start over because a buyer walked, the price of that short sale can go up. In this particular short sale, the seller had received a short sale approval but some mismanagement or confusion caused, he said, by his previous agent, resulted in a cancellation. Hence, he hired me.
Of course, I could daydream that all sellers should just list with me in the first place and avoid those types of hassles, but the truth is I could not handle the volume of every single short sale in Sacramento, nor would I want to. And there are other good short sale agents in Sacramento, some of which work at my company and to whom I occasionally refer business.
We went on the market at the price the banks had previously approved for the seller. Part of the problem was one of the banks sold the servicing of the loan since then. This is a phenomena I am seeing more of — banks dumping underwater loans and / or servicing to the market that was created to purchase worthless debt, some of which the banks own. The bank ordered a new BPO, even though the previous BPO had not expired.
Whoa. Prices were bouncing upwards. Now the bank wanted 20% more than it wanted a month ago. It’s a seller’s market in Sacramento. I presented that counter offer to the buyer, and the buyer immediately canceled. I don’t know what that buyer thought he could buy now that he was no longer in contract. Not my problem, though.
Found a new buyer and put that buyer into contract at the higher sales price (which by now, I should point out, is much higher still but the buyer has the price locked). We thought everything was going smoothly until the new second lender decided it wanted a lot more money than what the first lender was willing to allocate. The investor was Fannie Mae, so unless that bank has never dealt with Fannie Mae before, the bank should know that Fannie Mae has its maximum, and that’s the maximum. Fannie Mae does not allow anybody else in a short sale to pay the second lender, either.
That was little battle with the second lender, to get the bank to understand a) the first loan was really owned by Fannie Mae and b) the max is the max per Fannie Mae. After what seems like another couple of months, the second finally agreed and issued its approval letter.
Right before the lender’s property preservation company called and was about to shut off the water and change out the locks. But fortunately, that did not happen, and we were able to move forward to close. If you’d like more information about a short sale in the Sacramento region, please call Elizabeth Weintraub at 916.233.6759.
Listing a Sacramento Short Sale From Anywhere in the World
The problem with some short sales today is if they take too long to negotiate, the value of that short sale could go up and the bank could want more money. This was not a problem with Sacramento short sales in 2012, but this year some banks are asking for updated BPOs before the 90-day mark. Not to mention, once a short sale is approved and falls apart, there is no guarantee the next go-around will mirror the first. A smart Sacramento short sale agent knows this and takes precautions.
We are closing a short sale next week that came into my sphere sometime around Thanksgiving of last year. The seller called to complain about his agent — for what, I don’t recall — and asked if I would agree to take his listing. He had approval from the bank, too, but at the last minute something went haywire. I agreed to take the listing once the seller and his listing agent terminated the existing listing and removed it from MLS.
I should point out that the reason a seller is unhappy with a real estate agent sometimes lies with the seller and not the agent. I am typically hesitant to pick up a listing from a disgruntled seller because that seller could be the problem. One thing being in real estate for so long teaches me is there are a lot of nut-jobs in the world and people who don’t take their medication. On the other hand, about 90% of all Sacramento agents sell fewer than one home every two or three months, so what does that tell you? But, in this particular instance, my gut instincts told me the seller was not at fault. I told him to let me know when he was ready to go on the market.
You know what day he was ready to go on the market? Christmas day. Yup, Dec. 25th. And there I was: lounging about in my gorgeous overwater bungalow, watching the waves gently lap the piers, gazing at brightly colored fish swimming about under my glass floor. I was on vacation at Rangiroa, the second largest Atoll in the world, located in a remote chain of archipelago islands called the Tuamotu in French Polynesia. This is a place where it’s a miracle we were able to connect to the internet through satellite. It was a slow connection, and proved too much to smoothly connect to CAR’s antiquated ZipForms.
Even though the internet was sporadic, I received the email from the seller asking to go on the market. I managed to whip up all of the required listing documents through a combination of working with my dedicated team members and emailing forms to prepare and forward. One of my team members volunteered to go over to the home on Christmas and shoot photos and send them to me. I then uploaded all of the documents to DocuSign, my seller signed, and we went on the market the day after Christmas.
You can count on Elizabeth Weintraub. I take care of my clients no matter where I am in the world.
. . . Part II of this Sacramento Short Sale to follow on Monday.
photo: Gauguin’s Pearl Farm on Rangiroa, by Elizabeth Weintraub
