Sigh….
Short sales, where a home owner is selling their home for less than what is owed on it, can be maddeningly frustrating for all involved.
The problem is, mortgage lenders have to approve every short sale. This makes sense, as they are the ones taking it in the shorts and getting paid less than what was originally promised.
Lenders often take weeks to respond to a short sale offer. The general excuse is they are overloaded with requests and under-staffed.
OKfine. But does this give them a license to be idiots?
Case in point:
Short sale offer submitted on Feb 4. The lender approved the short sale on Feb 26 – which is actually quite swift for a short sale.
But, there was a little problem…
It took 12 days to fax the acceptance… generally speaking, a four page fax should only take what, 5 minutes, to send. The Pony Express could have delivered the acceptance faster. . .
Which brings us to idiocy numbers 2 and 3:
So the bank thinks they are providing the buyer a 28 day closing period. But due to the epic fail of the 12 day walk to the fax machine, in reality we have 16 days to close. Given that the buyer has to secure a mortgage, closing in 16 days is next to impossible.
A call to the “Special Services Department” yields this golden nugget:
“Oh, the buyer needs a mortgage? We weren’t aware of that.”
Really. That’s pretty much what section 1c of the purchase contract says, along with sections 2a through 2k. You know, the section with the big bold label of FINANCING.
Of course that entire page that covers the buyers loan pre-qualification might be another hint that a mortgage was involved. . .
And you want to assess a per diem if it closes late? Uhm, how much per diem? $5 per day? $100 dollars per day? Or would you prefer our buyers simply send you a blank check and you can just fill in whatever amount you want?
Here’s an idea. Instead of failing to read, and being unable to operate a fax machine, and asking for blank checks from the buyer, why don’t these banks just ask the government for money to keep them operational?
Oh wait, never mind. . .
(Note: lenders name and contact info intentionally distorted so their lawyers don’t ask me for a blank check.)
Creative Commons License photo credit: swanksalot. Thanks!!
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Jay!
If there was a way to applaude digitally, Id be all over it right now!
Preach on! Awesome post, my friend!
This is right on. Great job Jay! Too often we are blaming the wrong people for our current market issues. Keep it coming.
Huh. My “friend” Dean Ouellette just noted that the “I’m With Stupid” arrow points straight to my picture on the sidebar. Clearly that wasn’t intentional. Thanks Dean.
Jay-
It’s almost like the bank would prefer to go through the whole foreclosure process to end up owning yet another home!
Reminds me of two things:
1) Bill Engvall’s ‘Here’s your sign’ bits- “Oh, they need a mortgage?” “No, they just filled out a dozen sections on a purchase contract because they were bored. Here’s your sign.”
2) The ‘Potential’ Demotivator poster- “Not Everyone Gets To Be An Astronaut When They Grow Up.”
Jay,
I haven’t found a lender yet that actually reads the purchase contract. Oh….that doesn’t apply to them, didn’t you know? They are SPECIAL and I guess their fax machines are constantly on the move. The best explanation I have gotten lately is that they are receiving faxes electronically but only certain faxes are actually received that way! I was told that one yesterday…….
Keep your comments coming!
Vicky
Mr. Banker please consider using some of the Tarp money I just gave you to increase your loss mitigation staffing and training. In return, I will help you to move your short sales by bringing well qualified buyers together with well priced homes.
It’s WIN WIN WIN and LOSE/WIN!
WIN: Buyer gets a new home.
WIN: You get rid of a non paying mortgage
WIN: I make money
LOSE/WIN: The feds give the taxes I pay to you in the form of another TARP/Bank Bailout.
The deck is stacked in your favor Mr. Banker, just staff the loss mitigation dept and we are off to the races.
Jay, today I stopped at a BANK because I have had this check in my pocket for a couple of weeks and I could use the cash to buy a cup of coffee.
I don’t have an account at this bank. But, from time to time I get a check that is theirs and I don’t want to fill out a deposit slip and drop it in the BANK where I do have an account. I mean it is for $45 so I do what I have always done. I drive up to the drive-in window. Wait my turn because there are three cars ahead of me and each one takes about 5 minutes.
When I get to the window and hand over my check and driver’s license the lady fumbles around for about 3 minutes and then asks if I have an account. No. I just want to cash the check written on your bank. Well, if you are not a customer and will need to come inside. My five minutes are up. I think to myself, do I want to refuse to move my car until she cashs their check and make everyone behind me mad as hell or do I want to go inside or maybe just down the street to my BANK.
I go inside and bingo a line of just one person – who seems to have been standing there for quite some time. There is the teller at the drive-in and two tellers on the counter – both helping an older gentleman with some big banking problem he must have created that one teller could not fix. The one teller looks up and says she will be right with us. The girl in front of me doesn’t seem to impressed with the declaration. About 5 minutes go by and another bank person walks by and suggests we all move up so the teller can see us waiting. This really makes the girl in front of me happy – and she replies that the teller can see us all just fine, to the banker who disappears into an office.
I see the real reason she wants us to move up is because now there is a line of customers out the door. Finally, I get to a teller who takes the check and driver’s license fumbles around for about 2 minutes and asks me if I have an account with them. No, the check is from your bank and I want to cash it. Would I like to open an account? No, thanks. Two more minutes standing there like a dope and I am handed my cash.
Just when I was thinking, let’s give real estate over to the banks since they can’t make any bigger mess of real estate than the NAR and current broker system, they stab me in the heart. That’s a figure of speech. If they had really stabbed me, I would have ended up at the Hospital Emergency Room, and if I didn’t have the proper insurance and identification, I would be dead since we all know what a mess the health care industry has turned into in this country.
I must state that, have stood in lines at government offices like for the renewal of driver’s license and boat registration, etc. And, I don’t think our government does such a bad job after all. Let’s NATIONALIZE the whole works. They are all using monopoly money anyway so we might as well keep it with the one that can print it.
….and how long will it take for a new acceptance letter, with another unrealistic COE. It is a crime that these banks are turning or forcing good, qualified buyers to walk away.
**Jamie Geiger´s last blog post..Maricopa County Market Statistics and Trends-Phoenix Real Estate
I can’t tell you how frustrated we are dealing with some of these banks, I can understand that they need to approve the item but I can’t tell you how many times we get all the way to the end of the transaction with approved short sale in hand only to find out that the file was transferred to a new negotiator and we have to start with that new person which can further delay closings. Banks are not making this process any easier!
Remember the old WWII word, SNAFU… completely applies to short sales, banks, loss mitigation departments of today.
A client I was speaking to today said, “I have a friend who specializes in Short Sales”. Talk to anyone who is in Real Estate and sooner or later………….Short Sales are in their business portfolio. Specializing?? Short Sales equate to frustration for all involved. Unfortunately………we will be dealing in Short Sales for quite some time.
Hmmmm….In my recent experience I deliver the offer, wait 5-7 business days for response, receive a counter which must be responded to within 24 hours, deliver counter and wait 5-7 business days for response, receive verbal acceptance (yeah!!!!), but now have to wait 5-7 business days for fully executed contract, but now we have 48 hours to deliver emd…..and it goes on and on…I guess compared to some of what I have read my experience is not so bad.
Here in Minnesota over the last 3 to 4 months 60% + of the pending sales have been lender mediated transactions. Most of which are foreclosures. I am finding most agents are starting to steer buyers away from short sales. Case and point for me is I have a client that offered on a short sale on 9/5/08 and we have yet to get any response from the bank.
**Mn Mls´s last blog post..Search Downtown Minneapolis Real Estate Condos and Lofts
Fortunately not all banks are the same. We’ve dealt with the banks that take 3-4 weeks just for an answer, but we’ve also had several that have been great to deal with and the entire process went very smoothly.
I have a friend who is has been trying to get his lender to approve a short sale and the lender keeps losing the documents! It is hard to believe how incompetent these lenders can be!
**Dean´s last blog post..I like to read other people’s blogs
I think that the banks would rather let the property foreclose. That way they can collect their mortgage insurance payoff . That’s cash now. Then they can slash the price, sell at 50 cents on the dollar, and amass huge losses…. if they lose enough then they can get some more bailout money!!!!!….then the executives can split that up, sit back twiddling their thumbs and wait for the bank to actually fail!!!! That’s the ticket!!!!
**Dan Connolly -Atlanta Real Estate Guide´s last blog post..Disclosure: What the seller DOESN’T have to tell you in Georgia
14 days fax…LOL….could be it was in their electronic que (sp?). But on the other hand 14 days to close is not so bad…appraisal and lenders should not be overloaded nowadays. Git R’ done Dog
My last painful experience was last fall with a military buyer who was transfered from the area and couldn’t sell the house for what he owed on the mortgage. The short sell department wouldn’t even talk to us because he hadn’t missed a payment even though his sale would be short.
Sorry for the intrusion, I’m testing the Facebook Connect feature. Does this comment publish to Facebook?
Banks are clueless when it comes to short sales!! They always have some excuse as to why they did not receive the paper work or becasuse their assistant is out of town. Then when you finally get something done, you have 24 hours to fix the problem but then they get 24 days to sign off!! It is a vicious cycle!
I was talking to a lady from Las Vegas about short sales at our convention in October and she told me that she is concentrating on them because if they are done right and if you get enough of them then they can be very profitable. It seems to me that you would have to have a good “team” from end to end to make them work effectivly. Like you said, if they are taking forever to get approved and then get sent over, it’s a headache for everyone involved. Especially the buyer.
@Scott Focusing on short sales can be quite lucrative but expect to learn some hard lessons along the way. Certain lenders are almost reliably and unreliable and I’ll bend over backwards to avoid working with them.
This post made me laugh – something I haven’t done a lot of with dealing with short sale offers. Thanks Jay.
the problem is there is no incentive for anyone at the bank to get off their ass and make a deal. The guy gets his weekly check. give me the property and someone who can make a decision today and lets getter done.
someone get a house they want, the bank gets rid of a property they do not want and I get payed for what i do.
Nice post Jay.
Great post! I know the feeling and HATE dealing with Short Sales. But, they are a necessary evil.
Short sales can be soo frustrating. I too know a lot of agents that won’t even do short sales. You’d think they’d be falling over themselves to accept offers on a home that they are going to end up with.
It like Forest Gump said Stupid is as Stupid does. I have explained this to 10 year olds who get it.
Short Sales can be such a huge headache, esp when banks pull this kind of *stuff * and making it impossible for a homebuyer to BUY the home!
Is the plan to buy toxic assets going to make it easier to get short sales approved or do you think it will have any effect?
Agree here with the overall sentiment that lenders/banks are completely standing in their own way on this issue. I get that many of them cut staff months back – and some have yet to ramp up their Short Sale review departments (cause, you know… that would make sense)… but geez!
**Kevin Sandridge´s last blog post..A Tweet by Any Other Name…Using Twitter to Increase Blog Traffic
I love my job, dealing with clients, finding homes for them, selling homes…I LOVE everything; HOWEVER, when this kind of stuff happens, it is enough to make me rip my hair out. Sorry for your frustration, I can completely understand. I hope your buyer was able to get the house they wanted.
What risk do short sales have for the buyer? Any?
Pretty desperate for them to also add a per dium late fee if you dont close on time even though they gave in this case only 16 days for closing to take place putting the buyer in an almost impossible spot! They might as well have just increase the sales price 15 days late fee per dium! There are some funny people out there that is for sure. It really doesnt make any sense. How ironic, the stimulous of the economy is the banks/lenders bread and butter,, but yet they shoot themselves in the foot by making it impossible to buy a home with these kind of time frames!
I loved this story… it is amazing how even when you do everything right something so stupid can happen…. I am surprised they did not try to put the blame on you…. as you can see… great story thanks for sharing
**Thesa Chambers´s last blog post..Central Oregon Short Sale Facts
My short sale failed. Why? Lender MI requiring Promissory Note to be paid by Seller. $20K / 10 year note negotiated down to $10K / 10 year note, but Seller cannot pay the note. Hello? That’s why it’s a short sale. Seller can’t afford anything.
BPO was approved and we were waiting for approval to open escrow and then BAM! Bank negotiator says Seller has MI. Seller contends and proves no MI on account. Paperwork faxed from escrow and Bank EOY statement. Bank’s Customer Service even says no MI on account. Bank negotiator will not provide any proof of Seller MI thru emails and insists there’s MI. Not once did negotiator say it’s the Lender’s MI.
After 3 weeks of trying to prove no Seller MI, negotiator states that Promissory Note by MI is required or cancel request. BTW, this Bank has a short sale classified has Home Retention. Seller cannot pay anything so Bank negotiator cancels request – Home Retention request – April 16. Foreclosure scheduled April 27. Foreclosure does not happen – postponed until May 27 because it’s was under a Home Retention request. What? That was canceled already.
Bank says Freddie Mac moratorium required postponement. Bank says call Freddie Mac. Freddie Mac says the vacant home does not qualify for moratorium and escalates to Bank to foreclose.
No need to put the house up for short sale since Lender-owned MI will get in the way again. The house is desirable and gets multiple offers for the short sale, but the Bank takes too long and then is now bringing up the Lender-owned MI to be paid by the Seller. Get ready for even more frustration!
Buckeye, AZ
BTW, the above short sale’s bank is the same one that gave you a problem. I feel your pain. Same runaround.
Lending insititutions need to be reformed just a much as banks do! The reason we are in this mess is because of the bonus based culture that insititutions operated. What changes do we see? Well the B of A recently recruited their CEO internally (not much reform here then.) andbonuses are still being paid but now WE are paying for them through our taxes. Now we have to deal with bent congressman too.