We got lender approval a couple of days ago on a short sale. It is one of my favorite clients - but not one of my favorite stories.
I met the seller, Richard, almost five years ago. I was waiting on his neighbor - my client - to come out of her house so we could go look at houses. (I'd recently listed her house and her buyer found us during open house. I love it when that happens. So we were ready to go out looking for what she was going to buy next.)
Anyway, while I was waiting on her, Richard came out of his house, introduced himself and asked me to come take a look at his place, said that he'd want me to sell it for him one of these days. Beautiful property - huge lot, dozens of trees, pool, Arizona room, updated kitchen, very well cared for - great for entertaining. And pretty. Great curb appeal.
He was as good as his word. Some months later Richard called, asked me to show his wife and him properties, that his wife was ready to move. We looked, found something, made an offer, got it accepted - and cancelled after home inspection revealed issues. So much for that.
More months passed. Another phone call. Richard's wife had died and he wanted to put his place on the market. His plan at that time was to move to Florida and live with one of his children who was building a big home. I listed the property, held several open houses - and we did not get offers. The market was declining every day - and while the property was still being cared for, it was priced too high to attract a buyer.
Rather than reduce the price, Richard found his own buyer - a friend - and I prepared a lease-purchase contact. The friend would rent the property to a family member, and at the end of four years, the amount paid for rent each month would apply to the down payment and she'd pay it off.
The contract was legal, but it was risky in the market that we found ourselves in. As the buyer got close to the end of contract term, the value of the property was about $100,000 less than she'd agreed to pay for it, her business was hurting, and she could not live up to the agreement. She and Richard shook hands, the tenant moved out, and gave back the keys to Richard along with the house, leaking pool, dried up lawn and dead fruit trees.
In the meantime, Richard had moved on with his life, purchased another property for cash - and was left with a no-longer-beautiful property that he couldn't pay for. He couldn't rent it because he was out of money and couldn't afford to repair the pool or address the rest of the maintenance issues remaining after buyer/tenant walked out.
So, I listed the property again, this time at a price reflecting the current market. We got a buyer within days - and a long line of prospective buyers in case the first one changed his mind. The sales price is very very low - it will take the buyer a little effort to do the repairs needed. But the basic beauty is still there.
Since lender approval a couple of days ago, we're in the 10-day inspection period. If all goes well, we should close by the middle of September. Richard's credit takes a hit, but at his age that's less important to him than closing this chapter of his life.
Sunday, August 7, 2011
Tuesday, August 2, 2011
Short Sale - How Broke Do You Have to Be?
Finally, ten weeks after submitting a short sale package, today I got a call through to our assigned negotiator. (I won't name which bank - you might like them and right now I don't). The negotiator assigned to my file, who twice before had not returned messages that I have left for him, answered on the first ring.
As we were on the phone, he looked at our file for the first time. I'd submitted it with our offer on May 26. The first thing he said - after a 30 second review - was that they couldn't approve it because the loan was current. My response was that the seller, a recent widow, was struggling to make the payments, even though she was selling her furniture to do it. It's been a point of honor with her.
His response was that if she was paying, she could afford to pay. So much for honor.
I told him that the offer we had was $5000 more than a property just like it that had recently sold. He asked me for comps - which I sent. There are at least six comps that support the offer price. In fact, the offer we have is likely HIGHER than an offer we'd get on it were we to submit another offer today.
While I was at it, I sent the negotiator the seller's revised hardship letter - in it she makes clear that she's at the end of her resources and the August payment can't be made.
Later in the afternoon the negotiator called to say that it looks like the bank will have to deny the short sale - the loan is current, and in reviewing bank statements from April and May, it appears the seller can afford the property.
The task is to make it clear to this file processor, who is following the guidelines that his lending institution sets before him, that a lot can happen to deplete a widow's resources over ten weeks, especially when she's continuing to make payments on a property she doesn't live in and will never be able to afford to live in again. At the end of our conversation, he agreed that if we'd send him her June and July bank statements - and updated financial worksheet that he'd review them.
On the one hand, if a seller defaults on her loan, she's in danger of losing the property to foreclosure. That's likely a four-year black mark on her credit.
On the other hand, if she continues to make payments - robbing Peter to pay Paul, so to speak - the short sale may be denied.
The bank's negotiator hasn't told the seller to stop making her payments, and neither have I. She'd come to that conclusion about the time her bank statement shrunk so low that making a payment isn't an option.
What we'll do is submit updated bank statements and financial worksheet and see what this lender is willing to do for a 65-year old widow (who is a former employee of this lender) who wants to avoid foreclosure. A widow who brought a buyer willing to pay at or above market price for a house in a state the widow doesn't live in, a house the widow continues to keep up even though she can't afford it. A widow who in the past few months has run through resources attempting to keep current on this property - resources that she needs to keep her afload in her retirement years. We're not talking about wealth - nor comfort - just necessities.
I know - for the bank, it's a business decision. But it is beyond comprehension how this widow's short sale request could be interpreted as anything other than a financial hardship.
Give me patience. And give the seller a negotiator who cares enough to discern the difference between a financial hardship and a strategic default.
As we were on the phone, he looked at our file for the first time. I'd submitted it with our offer on May 26. The first thing he said - after a 30 second review - was that they couldn't approve it because the loan was current. My response was that the seller, a recent widow, was struggling to make the payments, even though she was selling her furniture to do it. It's been a point of honor with her.
His response was that if she was paying, she could afford to pay. So much for honor.
I told him that the offer we had was $5000 more than a property just like it that had recently sold. He asked me for comps - which I sent. There are at least six comps that support the offer price. In fact, the offer we have is likely HIGHER than an offer we'd get on it were we to submit another offer today.
While I was at it, I sent the negotiator the seller's revised hardship letter - in it she makes clear that she's at the end of her resources and the August payment can't be made.
Later in the afternoon the negotiator called to say that it looks like the bank will have to deny the short sale - the loan is current, and in reviewing bank statements from April and May, it appears the seller can afford the property.
The task is to make it clear to this file processor, who is following the guidelines that his lending institution sets before him, that a lot can happen to deplete a widow's resources over ten weeks, especially when she's continuing to make payments on a property she doesn't live in and will never be able to afford to live in again. At the end of our conversation, he agreed that if we'd send him her June and July bank statements - and updated financial worksheet that he'd review them.
On the one hand, if a seller defaults on her loan, she's in danger of losing the property to foreclosure. That's likely a four-year black mark on her credit.
On the other hand, if she continues to make payments - robbing Peter to pay Paul, so to speak - the short sale may be denied.
The bank's negotiator hasn't told the seller to stop making her payments, and neither have I. She'd come to that conclusion about the time her bank statement shrunk so low that making a payment isn't an option.
What we'll do is submit updated bank statements and financial worksheet and see what this lender is willing to do for a 65-year old widow (who is a former employee of this lender) who wants to avoid foreclosure. A widow who brought a buyer willing to pay at or above market price for a house in a state the widow doesn't live in, a house the widow continues to keep up even though she can't afford it. A widow who in the past few months has run through resources attempting to keep current on this property - resources that she needs to keep her afload in her retirement years. We're not talking about wealth - nor comfort - just necessities.
I know - for the bank, it's a business decision. But it is beyond comprehension how this widow's short sale request could be interpreted as anything other than a financial hardship.
Give me patience. And give the seller a negotiator who cares enough to discern the difference between a financial hardship and a strategic default.
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