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Rob & Catherine Hallberg
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Reality Show: Short Sale & Foreclosure Lore |
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This article is one in a series on Short Sales and Foreclosures. Eighteen articles are currently planned, but more will be added as needed. A complete list of articles appears at the bottom of this page. | ||||||||||||||
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Some of the stories you hear about Short Sales & Foreclosures seem so far-fetched that I decided to list some of them here, as by simply relating them to clients have caused eyebrows to rise up in disbelief. By compiling these anecdotal stories, I am adding to the body of knowledge and hopefully improving the credibility of agents reporting these events to their clients.
Lender Refuses to include Non-Recourse Language in Acceptance Letter:
A Lender of a Fannie Mae backed loan recently approved a Short Sale, thereby removing their Lien on the property. They would not, however, include language in the Acceptance Letter releasing the Home Owner from liability for the balance of the loan.
Arizona's Anti-Deficiency Statute prevents Lenders from pursuing claims on most foreclosed residential property; however, a Short Sale is not a Foreclosure and is not protected under this act. Most AZ Home Lenders will include Non-Recourse language in their letters due to the AZ Statute; if the home forecloses, they cannot pursue the debt anyway.
This lender refused to do so, which brings me to the point of this article. AZ Home Owners that Short Sell their home may be liable for the debt UNLESS there is language in the Lender's Short Sale Acceptance Letter that specifically removes them from this obligation.
Fannie Mae Acceptance Letters often have a paragraph or two but each Lender is different. Here is a one-line sample of the type of language I look for:
“Compliance with the conditions of this letter will result in full satisfaction of this mortgage.” In conclusion, "Seller Beware".
Two-Lender Short Sale Closed:
We recently listed and sold a Short Sale Home. Here are the facts:
Amount Owed on 1st Mortgage: $255,000 Payoff Amount Approved: $186,000 Amount Owed on 2nd Mortgage: $ 45,000 Payoff Amount Approved: $ 3,000
Time from Purchase Contract to Lender Acceptance: 15 Weeks Out of Pocket Cost to Home Owners: $0 Lender Refuses to Pay Recording Fee: This was a Short Sale in which the Lender had agreed to pay up to $5,000 in Buyer’s Closing Costs. When the Closing Statement was submitted to the Lender for approval, the total of Buyer’s Closing costs were less than $5,000. As a result, the Lender came out better than they anticipated when they signed the contract. They will no doubt quickly approve the Closing Statement, right? Not so fast. The Lender refused to credit the Buyer for the $25 Recording Fee even though the total credit was already less than $5,000. Furthermore, the $25 Recording Fee is charged by Pima County and is required to complete the transaction. Nevertheless, the Lender would not back down and the $25 was paid by the Buyer. Short Sale Approval Exceeds Ten Months: This transaction is still waiting on approval, so the clock is still running. To be fair, there are two Lenders, but this is one of the longest approvals I am aware of. The Agents representing the Seller have been making regular contact with the Lenders, so they are actively working for approval. Short Sale Lender Refuses Full Price Offer:
This is not so uncommon but it the problem originates when the Listing Price is first established. Sometimes Lenders will start with a well below market listing price in order to attract Buyers and offers; if they do not receive a reasonable offer above that price they will not accept it.
But there are also times where the home has been listed at what is thought to be a reasonable, market value price and a full price offer is later turned down by the Lender. Why? Lenders almost always request a 2nd opinion on the value of the home prior to approving the sale. The first opinion is the Listing Agent, who has some direct interest in having the sale approved. Lenders hire either an Appraiser or another Agent/Broker to perform a market analysis which is called a “BPO” or Broker’s Price Opinion when performed by a Realtor. If the BPO or Appraised Value is much higher than the offer price, even though it might also be the listed price, the Lender may refuse the offer. There is a misconception in real estate that a Seller must accept a full price offer with no Buyer concessions other than those that have been included with the Listing; this is not true. A Seller is never required to accept any offer; however, once they do accept a purchase contract there may be liabilities if they do not complete the transaction. | ||||||||||||||
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Disclaimer: The above article is, to the best of our knowledge and belief, an accurate representation of the facts. It is informational and not intended to be a source for financial or legal advice. We are not qualified to provide financial or legal assistance; however, we are licensed and experienced in the sale or purchase of Real Estate, and we will gladly provide guidance and recommendations in this area. | ||||||||||||||
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Associate Brokers, Long Realty | ||||||||||||||
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More Articles on Short Sales and Foreclosures | ||||||||||||||
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| Getting Your Offer Accepted | Foreclosure Lists: What They Are & Are Not | |||||||||||||
| Inspections: Protecting Your Interests | Reality Show: Short Sale & Foreclosure Lore | |||||||||||||
| Frequently Asked Questions | Next Article: To Be Determined | |||||||||||||
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| Negotiating the Lowest Possible Price | Short Sales: What is Taking So Long? | |||||||||||||
| Will Lenders Pay Your Closing Costs? | Reality Show: Short Sale & Foreclosure Lore | |||||||||||||
| Frequently Asked Questions | Next Article: To Be Determined | |||||||||||||
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| Should I Short Sell My Home? | Negotiating With Lenders | |||||||||||||
| Help! I Received a Foreclosure Notice | Future | |||||||||||||
| The Short Sales Package | Reality Show: Short Sale & Foreclosure Lore | |||||||||||||
| Frequently Asked Questions | Next Article: To Be Determined | |||||||||||||
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