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The Chicken or the Egg in a Sacramento Short Sale
The bickering that goes on between lenders in a Sacramento short sale remind me of kids. Maybe that’s because we don’t really grow up, we just get wider. Like, I don’t wanna eat it, YOU eat it. I know, let’s make Mikey eat it. Except Mikey is now all grown up, living in New York and earning a living hawking ads. But you know where I’m going with this, right? I’d like to talk about when we have two loans on a short sale. That’s when we run into what comes first: the chicken or the egg?
The first lender in this Sacramento short sale doesn’t want to issue approval until the second lender issues its approval letter. Of course, the second lender doesn’t want to issue its approval letter until the first lender issues its approval letter. And we can go around and around and around until we’re blue in the face, but nobody is gonna budge. They’ve got their positions staked out, and by golly, they’re not moving.
In California, I have to side with the first lender. Because it makes the most sense for the first lender to be reluctant, and I’ll tell you why in a minute. But first, let’s look at the second lender. The second lender is in a position of jack squat. The second lender, especially if it’s a purchase money loan, will get wiped out in a foreclosure and end up with nothing. It is in no position to negotiate. The only position it has is to disqualify the short sale and stop the short sale from going through, but that’s like cutting off your nose to spit your face. It’s just plain stupid. The second lender stands to receive funds, generously donated, I should point out, by the first lender. Otherwise, it would get nothing.
The first lender gives up certain rights upon short sale approval that the second lender does not. Those rights involve dual tracking. It’s the only part of the so-called dual tracking law that affects a short sale, unless you want to wait until 2018 when the law really takes affect. It says that when a lender issues a short sale approval letter, the lender must stop all foreclosure action and the lender can’t move forward on a Notice of Default or even file a Notice of Default. So, give the first lender a break. Issue the approval letter.
Sometimes, the only thing you can do if the banks won’t see reason is to hope the second lender elects to sell the note to somebody else so you can start over with a new lender. In fact, maybe you want to give them a list of lenders who buy these pretty much worthless scraps of paper — these no-equity seconds? Of course, this is presuming the second lender didn’t buy MI, which is another story for another day.
Nationstar Bank Short Sale and Down Syndrome
I woke up this morning with a Nationstar short sale and Down Syndrome whirling around in my brain. I don’t know why. See, this is what being a Sacramento real estate agent does to you. I didn’t dream about Shameless — that Showtime series about my family when I was a kid. No, seriously, my father was not nearly as sweet nor endearing as William H. Macy’s character. Yet, I couldn’t help but wonder if that baby on Shameless with the Down Syndrome really has Down Syndrome. I don’t mean on the show; I mean in real life. Because that would be really tacky. The NDSS would be all over that.
Unless the baby could talk. Then, it might be a way to better understand those born with Down Syndrome, we could develop empathy and this would be considered acceptable. Except the kid can’t talk. But if the baby could talk, I bet he could speak more clearly and distinctly than a negotiator at Nationstar.
A kid at Nationstar told us yesterday that the bank will no longer let sellers pay for a natural hazard disclosure when selling as a short sale. They don’t want to see that crummy little $99 fee on the HUD anymore. Yes, they realize it is state law that a seller must give a copy of the natural hazard disclosure to the buyer. Yes, they realize it is also against state law for the seller to pay for a natural hazard disclosure out of the seller’s pocket because all fees must be paid through the short sale. California Civil Code 580e says the seller is not allowed to pay for anything.
So, on the one hand, you’ve got Section 1103 in the California Civil Code that says the natural hazard disclosure must be delivered to the buyer as part of the sale. On the other hand, the Civil Code says sellers can’t be required to contribute or the bank is breaking the law. And then you’ve got a group of managers at Nationstar Bank deciding it won’t allow the seller to pay this fee from the proceeds of sale.
I realize every $99 adds up. Hey, I sell real estate in Sacramento and not in Newport Beach or I’d be retired by now. But, really, Nationstar. My TC sent me a copy of the email from the negotiator who told us to read the California Civil Code again, although it still says the same thing it said the last time we read it. Nationstar might be making her go sit in the corner for lunch, but that’s not our M-O.
Here is part of that email: “There is nothing to check with my managers as they are the ones who told us to no longer accept the NHD on the HUD. Guidelines change all the time, you cannot expect things to always stay the same. Malyssa”
All over ninety-nine bucks.
Today, there are more than 400,000 individuals people with Down Syndrome living in the United States. I hope none of those people ever have to subject themselves to Nationstar.
Two Loans on a Sacramento Short Sale
One of the reasons I write a daily blog is to educate and share my real estate knowledge with other people, and I hope it’s entertaining along the way. My secret to being so successful at blogging is that I write about what I know; I don’t write about what I don’t know. I might not know how to keep a souffle from falling or a yogurt from curdling so I don’t write about cooking, but I do know how to negotiate and close a Sacramento short sale.
As such, I recognize those who do not. It’s like a secret club in Sacramento. Nobody wants to admit that they don’t really know much about short sales, but most agents rarely deal with a short sale. I wish they would just tell me they need help, and I’d gladly help them, but some of them don’t want anybody to know. It’s like a badge of shame or something, which is ridiculous. While I can understand that reluctance, they’re not doing anybody any favors.
For example, an agent who doesn’t know much about short sales might tell their buyer that the buyer should not write an offer on a short sale with two loans. The agent might erroneously believe that it won’t close or the odds are it will be more difficult, which isn’t necessarily true. Two loans on a short sale provide less excitement than, say, a Bank of America FHA short sale or certain lender’s HAFA short sales or even a Fannie Mae short sale. Sometimes the two loans are held by the same institution, in which case even if the second loan was hard money that loan is probably exempt from recourse in California, so the lenders are more likely to cooperate.
I just closed a short sale recently that had a loan for almost $500,000 and that bank accepted a $6,000 pay off from the first lender. Don’t let the fact that there are two loans on a short sale frighten you away. Of course, there is one exception that could cause difficulty, although I haven’t yet encountered it, but I see it out there on the horizon. That is when the first lender refuses to issue an approval until the second lender issues its approval, and the second lender refuses to issue its approval until the first lender issues its approval. Yeah, it’s a Catch 22, and I did not much care for the book, either. One bank eventually caves in.
The reason a first lender might not want to issue an approval letter is because of the new law that went into effect on January 1 of this year which says after an approval letter is issued, the lender must stop foreclosure: The Homeowner Bill of Rights. It’s the only way to stop dual tracking. But I have ways to work around it, so if you’re looking for an experienced Sacramento short sale agent, make sure you call an agent like me who has closed hundreds of short sales. Don’t draw the short straw when it comes to your very own short sale agent.
A guy told me yesterday he had been talking with his property management company about doing a short sale. The property management company admitted that it does not sell real estate, it only manages rentals, but offered to do the short sale for him. What? How insane is that? It’s bad enough to give your listing to an agent who doesn’t sell real estate, but give it to an agent who doesn’t do short sales? Why don’t you just cut off your head now and leave it rolling in the street?
When the Short Sale Buyer Walks Away
I don’t know why they call it walking away in a short sale. When a short sale cancels, the buyer doesn’t always walk. Sometimes, the buyer is kicked out of the short sale, booted to the curb. Sometimes the buyer runs away because the buyer is frightened. Sometimes a buyer just can’t get financing together so the buyer can’t close. But buyers rarely walk. They don’t take a leisurely stroll. They don’t wait patiently with you for a green light like some little old lady who needs help hobbling across the street. They bolt. Like cotton.
A few days ago a buyer’s agent sent this Sacramento short sale agent an email to say her buyers were canceling. Those weren’t the words she used — because she did not understand that her buyers were canceling — but that’s exactly what was happening. She just didn’t seem to know it, for whatever reason.
You can tell a buyer she is purchasing a short sale in “as is” condition but that information often falls on deaf ears. People think they are special and their situations are special, but the truth is they are not. When a buyer signs an “as is” addendum, which all buyers do for a Bank of America short sale, this means regardless of what a buyer finds in a home inspection, there are no renegotiations. None. No price reductions. No discounts. Not only is that because of the “as is” addendum, but the market dictates it as well. That’s because another buyer will buy the home in its “as is” condition. In a heart beat. The bank knows it. I know it.
The only person who doesn’t seem to know it is the buyer. Oh, and the buyer’s agent.
But the really good thing about Equator and a Bank of America short sale is a new buyer can be slipped into the old buyer’s position. It’s called a soft decline. Providing that the negotiator at Bank of America doesn’t press the wrong button and close out the file by mistake, which has been known to happen, the new buyer approval doesn’t take very long. Within 30 days, the new buyer should receive short sale approval.
So, if your short sale buyer walks away, don’t despair. It’s not a huge deal in the overall scheme of things and your Sacramento short sale. In fact, walking away is a fairly common occurrence.
CHDAP Loans for Sacramento Home Buyers
Buying a home in a seller’s market, especially in our Sacramento seller’s market is super tough. Which is worse, you think? Being a CHDAP buyer in a seller’s market or being a VA buyer in a seller’s market? Because no doubt about it, we are in a seller’s market in Sacramento. And the buyers who really get my empathy are those who are struggling with having to write offer after offer after offer, and getting none of those offers accepted.
Fortunately, the Elizabeth Weintraub Team members don’t experience much of this. We often find our buyers get a whopping edge in negotiations. We’re experienced, and that alone is a major factor. Sometimes, other listing agents advise their sellers to accept our offers because they know us. They know we will perform. If it’s a short sale, our buyers will wait for short sale approval. They are educated about the short sale process. Our buyers are prequalified and have the preapproval letter and proof of funds to show it.
But I hear from other agents whose buyers are not so lucky. One agent last month told me she had written 15 offers for her buyer. It was tough because her buyer was relying on an FHA loan. We accepted her offer; most sellers are sympathetic with FHA buyers because they once stood in those shoes. The CHDAP buyers, however, are relying on down payment assistance because, for whatever reason, they often don’t have enough money to buy a home. VA buyers are different story. They are not required to put any money down but it doesn’t mean they don’t have it.
CHDAP stands for California Homebuyer’s Downpayment Assistance Program. It helps first-time home buyers with the downpayment and / or closing costs. There are income limits. CHDAP loans take longer to close, often 45 days or more. In a short sale, many lenders expect to close 30 days from approval. Some short sale banks will not grant extensions. This makes buying a short sale extremely difficult for CHDAP buyers. Moreover, in a competing multiple-offer situation, a CHDAP buyer is very unlikely to win when pitted against a cash buyer.
I question whether CHDAP is the right choice for a first-time home buyer who wants to buy a short sale in Sacramento. It might be better, depending on the situation, for a home buyer to scrape up the downpayment, ask the short sale seller to pay their closing costs and be done with it.
