I have worked with some real-estate investors in the past. I have learnt the short-sale tricks of the trade from the ‘Experts’. I have assisted Investors in about 9-10 short-sales till now. However, I’d like to share my current short-sale experience with you.
In 2010, I was assisting an investor. I stumbled upon this young lady (Let’s call her Ms. X) who wanted to short-sale her house. We (as a country) were going through the great recession and job losses. House values plummeted and short-sale was one of the few options a lot of people were left with!
I started her short-sale in end of 2010. I was NOT a Realtor then. We had to depend on other Realtors and Attorneys to communicate with Lender. I got my license in early 2014 and started working on the file myself- as the Realtor, with direct access to the Lender.
Remember, a Short-Sale is NOT a very lucrative undertaking. My observations in majority cases: Realtors or Attorneys send required documents to Lender; then wait infinitely for Lender to come back with an acceptable sales price. This number (generally market or above market price) is communicated to potential Buyers with the hope that someone will buy at that price! If that doesn’t work, property ends up in foreclosure!
Call it our misfortune, the underlying mortgage was an FHA. Meaning, it would fall under HUD guidelines. FHA in itself is a wonderful opportunity for homebuyers. But for a short-sale, it is a nightmare, with bureaucratic hurdles galore. Lender didn’t have liberty to negotiate. They had to go through the FHA waterfall i.e With every new Buyer, the file would be first valued for loan modification; and only if it is rejected, will they consider a short-sale. Every 6 months, the old appraisal would become redundant. Every appraisal was a different value. All efforts geared towards selling at old value went down the drain with new appraisals.
There were numerous issues. I will try to limit myself to few
- Sometimes, appraisals came in exceptionally high (thanks to non-local appraisers)
- Occassionally, when appraisals came on target, Lender would lose the file
- Buyer could not wait too long
- Buyer could not get a mortgage
- File kept getting stuck in the Waterfall process time and again
- Every so often, the Lender loss mitigation employees didn’t know the process themselves, causing confusion
- Lender analyzed Ms. X’s financials and asked for $ 4000 to close account as ‘paid in full’.
Patience and persistence, besides some ‘secret ingredients’ 😉 Entailed consistent follow-ups, negotiations, open communication and alertness. Attorney and I worked as a team. I only brought him in for Attorney Reviews and Closing Documents, while I bridged the gaps between the Seller, Lender and Buyer.
5 years (2.5 years under my wing), 7 buyers and 100’s of documents later (kudos to Ms. X), we closed on the short-sale (about $ 55k lower than what Lender was demanding earlier). I studied Ms. X’s financials myself and was able to convince the Lender of their misjudgment. Instead of putting $ 4000 out of pocket, Ms. X actually received $ 1000 from the Lender
This is the longest ever short-sale I have worked on. It was like an infinite roller coaster ride! Approvals and expiries and buyer short comings! But none other short-sale has left me as contended as this one! Ms. X’s gratification was priceless