Short Sale Tips Courtesy Bank of America

I went to an interview yesterday to listen to BOA's Gary Haygood's "insider information" on Bank of American short sales. Gary heads up BOA's closing department in Chandler. His phone is 480.224.4497 and his email is gary.haygood@bankofamerica.com. If my experience with BOA short sales is any indicator, just the contact information is good to have.

Here are a few of my notes:

• Sometimes it is simply not possible, no matter how much you beg and plead, for a "full deficiency release" letter. Even though the bank probably will not pursue the deficiency (assuming we're talking about owner-occupied property that meets all the standards), some investors have a policy not to include full release language in the short sale approval letter. Sometimes it's the mortgage insurance company who makes the decision. So if that's going to be a deal-killer with the seller, better address it up front. Because you may be successful with language changes sometimes, and othertimes it is what it is.
• We'll hear more about "cooperative short sales" soon. This is when the bank has approached a borrower who is behind on payments and suggests they do a short sale, at a pre-agreed price. BOA may be moving in that direction, but it takes a stable market for it to be a win-win, and I'd say the market is not quite there.
• Most BOA files are getting full appraisals rather than BPOs (broker pricing opinions) - unless the investor orders a BPO. What's the difference? A BPO is essentially quick and dirty - cheaper, but of less overall value than an appraisal.
• BOA is okay with electronic signatures on their short sale files. Not all banks are.
• One day soon we'll see a change in the closing process in equator - so that the offer worksheet tracks with the HUD. That'll be good.
• Standardized processes sound good in theory, but BOA owns only 20% of its loans. The remainder are owned by a wide variety of investors, and each investor has its own way of doing business.
• Probably the best piece of insider information is this: because the bank will have all the sellers' financial information, repeat - all of it, have a detailed conversation with the seller at the listing appointment so there are no surprises about income, expenses, debt, assets etc.
• BOA is becoming less and less receptive to "strategic defaults" unless the seller makes a contribution at close.
• Gary says that the seller does NOT have to be in default to do a short sale. Other contacts at BOA say that the seller MAY have to be in default - based upon the investor and/or the mortgage insurance company.
• Commissions at 6% are usually approved - but for properties at $375K, they may only pay 5.5%.
• What is a good offer? Fair market value, no "junk fees," no big repair credits. Closing cost credits are okay. HOA fees are NOT allowed tho' the HOA transfer fee is.
• If the seller's FICO score is high, BOA will ask for a promissory note. The higher the loss, the more they ask for.
• In BOA's equator system, when the short sale has been approved and the buyer drops out, you can't plug in another buyer and keep on going. All workouts are buyer specific. Based on the discussion, it sounds like that's to make sure "arms length" remains in place with new buyer. When you get a new buyer, you must ASK for a fast track - call the closer and ask. Will need to upload seller bank statements etc. again, but if you get a fast track, you at least have hope of getting the transaction to close with a new buyer.