Short Sales and Foreclosures

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Katheryn "Kat" Gardner, Licensed Real Estate Agent, Hilton Head Island, SC

Date: January 2, Number of Replies: 10

Hello All!

I know we have gone over this territory many times but it seems there are some fairly new issues that I see becoming more and more common. The issue that concerns me most at this time is the lenders refusal to accept ANY offer on a property. I have seen this quite a bit lately and it seems to have coincided with the announced "bailout". Here is a great example: A local agent has a home listed as a short sale with the usual language regarding third party approval, commission, etc. I showed the home and have a buyer that is ready to purchase. I called the listing agent to ask a few questions and she tells me to "forget it". The bank has refused all offers and has made it clear they will not sell the home for anything less than the full amount owed. They have already refused several full list price offers, one of which was cash, no contingencies. The agent has asked them to send her a letter of withdrawal because they have no intention of selling at the price they agreed on and it is useless to keep this property on the market. The lender refuses to withdraw. Could this be because they believe they will receive more money on this property from the bailout? Maybe properties still on the books they are "trying" to sell will be treated differently than ones they have taken a loss on? Once a price is agreed upon and the lender sets the price are they contractually bound to accept an offer? Not just any offer but one that is full price and no contingencies?

As I said, I am seeing more and more of this refusal to actually sell the property. If anyone else has had this issue or has any answers that may make sense of this, please let me know!

Kat Gardner

Katheryn "Kat" Gardner,

Realtor, ABR, SRES, E-Pro, RSA

RE/MAX Island Realty

99 Main Street

Hilton Head Island, SC 29926

843-422-3381

www.KatGardner.com

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Catherine Myers Licensed Real Estate Agent, Walnut Creek, CA

Date: January 2

to ask a few questions and she tells me to "forget it". The bank has refused all offers and has made it clear they will not sell the home for anything less than the full amount owed. They have already refused several full list price offers, one of which was cash, no contingencies. The agent has asked them to send her a letter of withdrawal because they have no intention of selling at the price they agreed on and it is useless to keep this property on the market. The lender refuses to withdraw. Could this be because they believe >>>

I think you're mixing apples and oranges here. If this is a short sale, it is the seller that would be cancelling/withdrawing a listing, not the lender. In a short sale, the lender does not own the property and is not a party to either the listing agreement OR the purchase agreement. They are simply a "subject to" or a "contingency of" the purchase agreement.

There are banks that do this. B of A will very sneakily have you waste a ton of time on a short sale only to approve it - yay, right? Wrong, then they make the borrower (your seller) sign their letter saying they'll release their lien but the difference between what they get and what is owed, will turn to a collectable balance and they will pursue the deficiency.

So, if a bank is not willing to work with them, better to know now and move on. Banks make no sense. We can't even try to make them.

So back to your question... one banker told me outright that she'd rather foreclose than short sale as they can file for reimbursement with the gov't. Short sales have gotten harder as the banks are scrambling to figure out which is better , a short sale now, or a foreclosure loss later. But a lender does NOT need to withdraw from any short sale arrangements. The seller can cancel the listing and either live at the house til they are foreclosed on, then the bank may pay them cash for their keys - or they can just walk away now and be done.

It is NOT unusual these days for people to be forced into these situations.

Folks, the banks are not our friends, and they most certainly are NOT the friends of our clients - THEIR borrowers. Period.

Catherine Myers, REALTOR

GRI, CRS, ABR, SRES

Alain Pinel Realtors

1646 No. California Blvd., Suite 101

Walnut Creek, CA 94596

925-683-2125 cell

925-465-1593 fax

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Date: January 3

Kat Gardner wrote:
I know we have gone over this territory many times but it seems there are some fairly new issues that I see becoming more and more common. The issue that concerns me most at this time is the lenders refusal to accept ANY offer on a property. I have seen this quite a bit lately and it seems to have coincided with the announced "bailout". Here is a great example: A local agent has a home listed as a short sale with the usual language regarding third party approval, commission, etc. I showed the home and have a buyer that is ready to purchase. I called the listing agent to ask a few questions and she tells me to "forget it". The bank has refused all offers and has made it clear they will not sell the home for anything less than the full amount owed. They have already refused several full list price offers, one of which was cash, no contingencies. The agent has asked them to send her a letter of withdrawal because they have no intention of selling at the
price they agreed on and it is useless to keep this property on the market. The lender refuses to withdraw. Could this be because they believe they will receive more money on this property from the bailout? Maybe properties still on the books they are "trying" to sell will be treated differently than ones they have taken a loss on? Once a price is agreed upon and the lender sets the price are they contractually bound to accept an offer? Not just any offer but one that is full price and no contingencies?
As I said, I am seeing more and more of this refusal to actually sell the property. If anyone else has had this issue or has any answers that may make sense of this, please let me know!

Since I'm from PA I can only speak for myself it appears that this property is a short sale and therefore the lender in Pa would not be party to the listing only a third party who can approve the selling price. The owner can sell at any price if they funds to close and make the lender whole. However if the property has been foreclosed on then the lender is the seller. Sometimes we forget that a listing has two parties the agent and owner and I know of no law that requires anyone to work with anyone else. If it was me I would ask the person that signed the listing what they want to do. As always ASK YOUR BROKER for help. You can always notify all parties that you will put in you list "By request of lender full price offers only. and it by Cert. Mail. This is MHO.

Philip J. Cunningham Sr.e-pro Joseph Solomon Realtors 304 Huntingdon Pike Rockledge,PA 19046 http://GreatPaRealEstate.com Office 215-379-1722 Fax 215-379-1622 E-Mail PhilCunningham2004@yahoo.com

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John Cleek Licensed Real Estate Agent, Louisburg, KS

Date: January 3

Kat Gardner wrote:
I know we have gone over this territory many times but it seems there are some fairly new issues that I see becoming more and more common. The issue that concerns me most at this time is the lenders refusal to accept ANY offer on a property. I have seen this quite a bit lately and it seems to have coincided with the announced "bailout". Here is a great example: A local agent has a home listed as a short sale with the usual language regarding third party approval, commission, etc. I showed the home and have a buyer that is ready to purchase. I called the listing agent to ask a few questions and she tells me to "forget it". The bank has refused all offers and has made it clear they will not sell the home for anything less than the full amount owed. They have already refused several full list price offers, one of which was cash, no contingencies. The agent has asked them to send her a letter of withdrawal because they have no intention of selling at the price they agreed on and it is useless to keep this property on the market.

I don't present myself as the leading expert on short sales but I have spent a lot of time studying the process and know that various state laws make it impossible to make blanket statements that apply in all areas of the country. But one sentence in Kat's post prompted this reply. Several months ago I had a buyer willing to pay the full listing price for a property that was in pre-foreclosure and the owner and the owner's agent had listed the property as a 'short sale'. The agent kept seeking to obtain approval of the offer from the lender and kept reporting that he was unsuccessful. At that time I had not spent enough time studying this type of transaction and suspected all sorts of fraudulent possibilities. Ultimately the property went into foreclosure and will eventually be re-listed (probably for less that my buyer was offering) and everybody will lose money that didn't need to be lost.

What I discovered was that while any agent can list property for less than the amount of the lien's against the property and thus should note that it would constitute a short sale, that in no way means the lender has agreed to accept the price and waive any deficiency judgment against the previous owner (the seller). I realized that had I been better informed about the handling of short sales I could most likely have assisted my buyers in obtaining this property, protected the seller from having a foreclosure on their credit, and saved the lender some of the money they lost when the property went into foreclosure.

Unlike the presentation of an offer to the seller in a standard sale, the role of the agent in a short sale is extremely important to the possibility of success. I would never present an offer to the lender in a short sale situation unless and until (1) I have a qualified buyer willing to make a no contingency offer; (2) the owner has accepted this sale subject to approval of the lender; (3) I have verified there are no other liens against the property; (4) I have prepared a market analysis of the property establishing clearly why this offer is the best the lender could expect if they wait and foreclose on the property; and (5) I have a well-written hardship letter sufficient to convince the lender that a deficiency judgment will be a waste of time since there is no more blood in this turnip; and (6) I have a copy of this lender's short sale procedures and have compiled a complete presentation with all of the documents they require. Then, and only then would I make a presentation to the lender for approval of the sale and waiver of the deficiency judgment.

You don't need the lender's approval of the short sale unless you are requesting a waiver of the deficiency.

John

John E Cleek, Ph.D., e-PRO, Realtor� and Marketing Consultant

The CrownPlatinum Team, Crown Realty of Kansas,

1005 W. Amity � Louisburg, KS 66053

Licensed in Kansas and Missouri

johncleek@crownplatinum.com

www.crownplatinum.com

Pho: 913-709-4423 � Fax: 913-837-2549

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Catherine Myers Licensed Real Estate Agent, Walnut Creek, CA

Date: January 3

You don't need the lender's approval of the short sale unless you are requesting a waiver of the deficiency.>>

I am also not a self proclaimed "expert" on short sales, but I've done plenty of them. Most of what you say is true, and much of the chance of a successful short sale hinges on that that listing agent and the proper preparation and presentation of a bonafide offer with all the supporting documentation required by the lender.

And, you are right that each state is different. In California, a lender forecloses via what we call a "trustee sale" , there will be no deficiency against the homeowner on purchase money loans. HOWEVER, I do not understand what you said, and what I quoted above... you DO NEED a lender's approval of a short sale as you need them to release their lien . Releasing their lien, and releasing their deficiency interest are really two different things. In California we mostly deal with deficiency possibilities on the seconds, non purchase money cash out re-fi's, and HELOC's . A second may release their lien, but not their deficiency interest. We still need their permission and consent to the short sale or we can not sell it or transfer clear title. They have a secured/lien interest in the property and without their consent, we can not sell.

Catherine Myers, REALTOR

GRI, CRS, ABR, SRES

Alain Pinel Realtors

1646 No. California Blvd., Suite 101

Walnut Creek, CA 94596

925-683-2125 cell

925-465-1593 fax

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John Cleek Licensed Real Estate Agent, Louisburg, KS

Date: January 3

Catherine,

My sentence construction may have been misleading. What I was stating was that I have had sales where the seller had to bring cash to the sale but did not consider it a short sale or subject to prior approval by the lender since the seller had already made the decision to bring money to closing in order to avoid any impact on their credit by requesting a concession by the lender.

I have no disagreement with you regarding the need to obtain a release of all outstanding liens.

John

John E Cleek, Ph.D., e-PRO,

Realtor� and Marketing Consultant

The CrownPlatinum Team

Crown Realty of Kansas

Miami County - Linn County - Johnson County

1005 W. Amity � Louisburg, KS 66053

Licensed in Kansas and Missouri

johncleek@crownplatinum.com

www.crownplatinum.com

Pho: 913-709-4423 � Fax: 913-837-2549

Finding the RIGHT REALTOR . . . Priceless!

On Jan 3, 2009, at 4:39 PM, Catherine Myers wrote:

I do not understand what you said, and what I quoted above... you DO NEED a lender's approval of a short sale as you need them to release their lien .

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Steele Propp Licensed Real Estate Agent, Minneapolis, MN

Date: January 3

You don't need the lender's approval of the short sale unless you are requesting a waiver of the deficiency.

I am not understanding this comment, John. A short sale can occur without this waiver. The bank could agree to a note to be paid in the future or simply wait until later to file the deficiency if the waiver has not been addressed in the agreement. Yes, the smart borrower would want it but there are cases of them not getting them.

A short sale by most definitions is the lender accepting less than what it is owned/total costs. Money is coming out of it's pocket. Doesn't mean that they couldn't have an agreement to recoup some of the loss in the future.

Or am I misunderstanding what you are trying to say?

Steele

Steele V. Propp
Foreclosure Specialist/ Loss Mitigator
Bank Owned Property Division

Schatz Real Estate Group
1009 Mainstreet
Minneapolis, MN 55343
(612) 325-6764 Direct Line/Cell
(952) 938-2593 Office
(952) 938-3831 Fax mailto:SteeleP@aol.com

Access Hundreds of Twin City Bank Owned Homes http://www.MinnesotaForeclosureNetwork.com

Foreclosure, Short Sale Training and more. Start with Free Video Training. http://www.automateyourwebsite.com/app/?af=380101

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Paul Silver, Portsmouth, RI

Date: January 4

My sentence construction may have been misleading. What I was stating was
that I have had sales where the seller had to bring cash to the sale but did
not consider it a short sale or subject to prior approval by the lender
since the seller had already made the decision to bring money to closing in
order to avoid any impact on their credit by requesting a concession by the
lender.

I have no disagreement with you regarding the need to obtain a release of
all outstanding liens.

John

---

Technically, such a sale would not be considered "short" since the seller
was paying off all liens at the sale... but yes, the lender would not need
to be notified at all in such a case, provided the seller did in fact bring
that cash to the closing and the liens were paid.

Have a great day!

Best regards,

Paul Silver
Focus Professionals, Inc.

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Jennie Blackburn Licensed Real Estate Agent, Redington Beach, FL

Date: January 5

Remember that lenders are not a party to the contract.

The privity is between the bank and its borrower…the putative seller.

The bank has zero obligation to the buyer. The approval is not an approval for the contract, it is an approval to allow the seller to close on the contract and make a cash settlement (at closing) with the lender agreeing to certain things, including price (or, more realistically, net to the bank upon closing). The negotiation with the "bank" as to commission rate, expenses allowed, all that is negotiated on the seller's behalf. The listing Broker (and mitigator, if the seller agrees) is granted the authority to negotiate on behalf of the seller…not the buyer.

Lender service companies have been delegated the authority (sometimes very limited) to negotiate on behalf of the lender (or investors in the mortgage).

When a Realtor offers the price in the MLS it is a contingent offer, contingent on the lender making a deal with the seller/debtor. There is no way that Brokers or sellers can know what the service company for the lender will accept. That acceptance is a moving target on a day-to-day basis based on the service company management (delegated from the lender). This is a changing market and we know that the financial condition of both service companies and lenders are very suspect and really unknowable.

Prices advertised in the MLS are purely guesses on the part of the seller…guesses of what the lender might take from them to settle.

Jennie Blackburn

www.blackburninvestors.com

Redington Beach, Florida

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Carmelo Gines Licensed Real Estate Agent, LATHAM, NY

Date: January 5