Several words come to my mind when I hear the words “short sale”.
Several aren’t fit for print… others include headache, excruciating, and “I quit”.
A “short sale” is one in which the proceeds will not cover the owner’s loan(s). The lender in other words, isn’t going to get paid the full amount they are owed. They are going to be “shorted” on the loan obligation.
One of the short sales we have listed is in Chandler. Nice little home, but the owners mortgaged it to the hilt, pulling out equity multiple times as home values skyrocketed in the Phoenix real estate market. Some refer to this practice as, “using your home as an ATM machine”.
That’s generally a very bad idea.
Especially when combined with sub-prime adjustable rate loans.
Facing foreclosure, we listed the home — well in advance of the Trustee Sale (often erroneously called a foreclosure sale). After much consultation with the lender, it was determined that they likely would accept a sale that netted them 70 cents on the dollar. The math was done to determine a list price of $162K on a home that comped right at $200K. (Note, some lenders won’t even broach the subject of a short sale until an offer is in hand. Others will pre-negotiate, sort of. Every lender is different.)
Now one would think a home listed 20% under market value would be flooded with people clamoring for a great deal.
After three months, an offer close to what the lender might accept was received (they swiftly nixed an offer for $75K).
Then came the real negotiations, and the interminable waiting game.
The Arizona Short Sale Addendum states, and I quote:
Buyer and Seller acknowledge that it may take weeks or months to obtain creditor(s) approval of a short sale.
This did not deter the buyer’s agent from calling every third day to see if we had lender approval for the sale. They did finally grow weary and realized we were in for a long wait.
As the seller’s agent though, it was my job to “persuade” the lender to accept the sale. Copious quantities of data were supplied to them, and I talked to 13 different people in the loss mitigation department. Finally, after 10 weeks, we got a verbal acceptance.
Getting that acceptance in writing took another four weeks. And when we finally received the lenders written approval, we had two weeks to close.
Back to the phones. Back to absurdly long times on hold (at this writing, my phone log shows I’ve spent 516 minutes on hold with this lender — 8.6 hours).
What a pain in the ass this lender has been (Ocwen, for those interested). The biggest crow bar in the negotiating tool box is the fact that while the lender was doing whatever they do while we wait for loan approval, the Notice of Trustee Sale was recorded. In a nutshell this means the home will likely be foreclosed on and returned to the lender 90 days after filing. This generally motivates lenders because they really don’t want to take back a home and have in languish on their books while they attempt to sell it in this market.
This generally motivates the lender. Many (most?) people working in a lenders Loss Mitigation Department have zero clue about local real estate markets. Here we had their approval for a short sale and just needed a couple more weeks to make it happen.
Getting that extra two weeks was like pulling teeth. Again.
As the deal appeared to be unraveling last week, the lender finally snapped into reality and it looks like we are a go for closing early next week.
At least that’s my story for today, and I’m sticking with it.
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