"I just don't get it! Why would they just ignore our offer? Don’t they want to sell this house?”
I know I will hear this lament at some point when a client puts an offer on a short sale — no matter how many times I warn them upfront. Turns out...falling into the land of short sale limbo is something you have to experience firsthand.
Weeks, and sometimes months, can pass before a bank responds to an offer on short sale. Add to that a plethora of other fun facts: sellers who aren’t giving the banks the proper documentation they need to approve the short sale, sellers who don’t really want the short sale approved, because they want to continue living in the house for free, second-lien holders who won’t release their liens on the house, and well, you can start to see just how messy it can get.
Despite pressure from Realtors and lawmakers, short-sale procedures have shown little improvement in the past six months, according to a Short Lender Satisfaction Survey taken by the California Association of Realtors (CAR). CAR polled its member agents, who reported the banks are just as slow as ever in responding to short sales despite frequent promises of improvement. More than three-fourths (77 percent) of Realtors reported closing short-sale transactions as “difficult or extremely difficult,” up from 70 percent in December.
Some banks have tried to improve how they handle short sales, but it doesn’t seem to equal any improvement for buyers, sellers or Realtors. Wachovia, and to a lesser degree its new parent Wells Fargo, are well known among Realtors for handling short sales better than other banks. However, most banks have dealt with the short sale problem by coming up with ways to streamline communication for themselves, not the Realtors or customers trying to reach them.
Many now require communication only through online portals similar to endless voicemail systems that ask a lot of questions and only lead you to a real person after a lot of time and frustration. Like HMOs which are designed to keep patients away from the doctor until the last minute, banks have now set up firewalls to keep Realtors and homeowners away from the asset managers who will ultimately decide whether a short sale is approved or not.
With all this in mind, here are a few questions to ask your Realtor if you are considering purchasing a short sale:
1. How many loans are there? Who are the loans with? If you hear there is only one loan, it could make things easier. If you hear there are two and one is a second lien with a credit union or a second lien held by a collection company, it could make things harder.
2. Have the sellers submitted all of their documentation to the bank/banks? Sellers have to provide a lot of proof that they qualify for a short sale and they have fill out a lot of forms. These usually have to be submitted several times, because the banks have a habit of “losing” them even when they are sent in. If the sellers haven’t submitted everything they need and received verification from a live human being that it has been received, the short sale will not move forward.
3. Is someone at the bank or banks actually communicating with the listing agent? Have they given a timeline?
4. What is the “sale date"? This is the foreclosure date. Banks frequently foreclose on properties that have short sale offers on them.
And here's another warning: If a listing agent says a property is an “approved short sale,” don’t believe them. Banks only approve one short sale offer at a time and then give a month or so to close the deal. When a listing agent says this, it means the bank approved the last offer and that buyer walked away for some reason. (They probably got tired of waiting.) The short sale process will begin all over again when the bank finds out there is a new buyer for the property, though sometimes it helps a little if the bank has previously reviewed the file and ordered appraisals, etc. Only Bank of America has recently approved “back-up offers” on short sales.
CAR has sent several letters to the major banks holding short sales —Bank of America, Wells Fargo, Chase — and demanded better handling of these transactions, to no avail. If you’re involved in a short sale as either a buyer or seller, stay as detached as possible from the outcome. Nothing can be counted on until an official letter approving the short sale has been issued, and then you still have to get through the loan approval, inspections and appraisal before you’re “home free.”
Here are a couple of “regular” sales, meaning they are not a short sales, in Concord and Clayton:
380 Blue Oak Lane, Clayton
4 bedroom, 3 bath, 3009 square feet
This gorgeous home offers a really beautiful setting with pretty garden views all around and an inviting pool as well. It is updated throughout with granite counters and stainless steel appliances in the kitchen, hardwood floors, and a downstairs bath that has been remodeled. It also has fresh paint and "newer" carpet.
3612 Chestnut Avenue, Concord
3 bedroom, 2 bath, 1736 square feet
This home is remodeled and has a great open floor plan with a game room big enough for a pool table and a bar. There is also a great backyard with a pool and RV parking & hookups. It offers hardwood floors with crown molding and baseboards, designer paint, and an updated kitchen with a cute breakfast nook and bar.