That’s right. While I probably haven’t made it as public as Jonathon Dalton, I’m not much of a fan of short sales. Monday, Kelley Kohler was talking about how few short sales that are listed actually get sold. I don’t want to be a part of any similar non-sold statistics. That’s not why I became a real estate agent. To be more precise, what I’m not a fan of, is the hoops and delays a buyer is put through, regarding short sale listings. Many short sale listings have a fictitious price, set by the listing agent, without ever speaking with the bank to see if a contract would be accepted at that price. Currently, most banks are now requiring an appraisal that justifies the list price, and will only accept a contract that is within 92% of that appraised price. Other banks don’t have a guideline with regard to appraised value.
The true joy of a short sale listing, of course, is dealing with the customer service departments of huge banks. For these 3 properties, I get to work with Countrywide and Chase. There’s simply nothing more rewarding than calling an 800 number and dealing with a call center employee in a different country, explain what I need, get placed on hold 7 times, transferred around 4 times, and finally get the person I need to speak with. At Countrywide, I was finally connected with the “work out” department, which is the department that handles a short sale, where Kim (who was honestly as helpful as she could be) informed me of the process I’ll need to go through:
- List the property at fair market value (as if I would ever dream of listing it higher)
- Do nothing, until an offer is made on the property
- Fax the offer over to Countrywide, requesting a short sale person be assigned to my case
- Expect to wait 3-5 days for a Countrywide negotiator to be assigned (each negotiator is handling just 150-200 cases at a time right now)
- Once assigned, the negotiator will order an appraisal
- Expect to wait 5-7 days for the appraisal to come back
- With the appraisal complete, the negotiator will prepare the case (expect to wait a few days for that preparation), and then present the short sale offer to the underlying investor that Countrywide is servicing the loan for
- Expect to wait weeks (not days) for the response from the underlying investor
- Overall, inform everyone involved to expect to wait 6-8 weeks, just to get a response from the underlying investor about whether they will accept the offer
- Once the offer is accepted (if it is indeed accepted), the buyer must close within 30 days
I asked Countrywide repeatedly if there was anything I could/should be doing to make the process go faster. The only suggestion, beyond what I was already doing, was to follow-up with the negotiator that gets assigned. In other words, the squeaky wheel may turn faster, so long as it’s squeaking every day.
Chase has a different process that starts with an appraisal in advance of the contract, but does include a 2nd appraisal at the time of the offer, before the offer will be accepted. Because Chase is the investor, there won’t be as long a delay, but it’s still going to cause a delay to get the appraisal back after an offer is made. It sounds like the Chase process should expect to take 2 weeks. Since Chase has the 92% guideline, which is at least something that we can be specific with, regarding any/all offers made on the property, hopefully we’ll be able to avoid unnecessarily wasting anyone’s time, by getting an appraisal at the time of the listing. Chase won’t use our appraisal, but at least I’ll have an unbiased opinion about what fair market value is today.
I think the only thing that will make all of this tolerable, is that I’m co-listing all of these with Tanya Boruch in my office. We’ll get to take turns dealing with the banks, and hopefully one of us is able to befriend the negotiator that is assigned to our case (I know, that’s wishful thinking).
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Well, the good news is that some DO sell. I’ve had buyers sucessfully close on short sales. You just have to find the right buyer who doesn’t have any set timeline to get into the house, and who is willing to risk a little money on inspections. So many listing agents of short sales that I’ve called don’t even know where to start, have no package together, it’s crazy. If you know what you’re doing and are proactive, you’ve got a solid chance. IMHO. Let us know how it goes!
Oy! The Countrywide scenario you describe sounds exactly like what I experienced with CitiMortgage on behalf of a client. I finally told her I wasn’t sure I could get through the whole process before Citi auctioned the property. The seller hired a foreclosure specialist to help. I can’t say I recommend the specialist since he’s given me only grudging insight into what he’s doing. He claims to have an investor’s offer approved by Citi, and that he’s already got the 2nd lienholder to agree to the short sale. But I’ll believe it when I see documentation (which to date hasn’t been forthcoming despite my repeated requests for it). Good luck! Suggestion? You and Tanya should play Good Cop-Bad Cop with the lenders!
Why wouldn’t you get 2nd lien holder approval before 1st lien holder? If the property was bought with an 80/20 piggyback, I owuld think that before you jump the 1st lien holder’s hoops, you would wnat to know if the 2nd lien holder will accept a bone from the 1st lien holder, otherwise you will get to closing and some VP at the send lien bank will not accept the wipeout, especially if the investment pool that owns the loan has default insurance.
This is why I think most 2 lien short sales fail. 1st lien holder has a superior position, but the 2nd lien holder has to allow the foreclosure to happen before they can collect the insurance which is far greater than what the 1st lien holder will offer. I doubt that anybody at the workout depts has been trained in this small but rather vital detail.
Steve, for us as agents scratching out a living, I think the answer is to charge the seller and upfront fee funded by their not having a housepayment. Then, much to Jonathan Dalton’s dismay, using the short sale listing as bait for online buyers.
Actually, for these 3 properties, only one of them has a 2nd lienholder, and that 2nd is actually a HELOC, which has a different set of rules than a 2nd mortgage. Although we don’t have all of the details wrapped up (I’m sure everyone’s surprised the details are taking just a bit longer to straighten out) the likelihood in the case of the HELOC, is the shortfall may follow the owner as a personal debt (we’ve asked the owner to find his paperwok, to research it). If that’s the case, it won’t actually be a short sale, as the first looks to be well secured by the value of the property. As well, if that’s the case, there’s a good chance he’ll cancel the listing, unwilling to have the HELOC follow him.
And Thomas, charging a marketing fee at the time of the listing, if I don’t think I can possibly sell it in time to save foreclosure, is indeed a good approach. I’ve talked to other agents that are indeed doing that, or have done that in the past, with unsellable listings. Personally, my approach would be to politely say that I don’t think I’m the agent for you and decline the listing. I’ve done that several times this year, and it’s more the style I prefer to work in. Of course, we all have our preferences, and this is a good reminder to keep an open mind to every possible scenario.
I am just coming off two short listings- (I terminated them) and I spent more time and effort dealing with the banks than any normal sale. The opportunity cost is just too great when the monolith takes more time and effort than the doable. I found that those 2 “listings” made me really cranky and in our business attitude management is 90% of the battle to deliver outstanding service to our clients.
Hello. My wife and I just put a bid on a short sale house. A week later, the 1st lender tells us that they are going to have an apprasial done. ??? Would the bank actually appraise the house over the listed asking price? Is this common practice? Was the listing price a ‘bait and switch’ move?
We have a budget, and a ceiling price that we will not go over. The listed asking price was close to our ceiling. We offered at a point where we could happily negotiate to our ceiling. If the bank’s appraisal is over the original listed ask, do they think we will blindly chase afterwards, or are they telling us that they just don’t want to sell the house?
Hi Joe. The practice of the bank having an appraisal ordered, after your offer is submitted is indeed normal. And it’s also, sadly enough, normal for an agent to set a list price on a short sale that is no where near a real market value (very low). The bank uses the appraisal to establish whether or not your offer is reasonable. Most banks have some sort of percentage threshold they are going to accept, although it does vary from property to property, probably based on how bad the financial situation is with that property.
The bank will probably counter back at you, as that is their nature, but feel free to counter back to them. It’s a negotiation, and the bank is going to be willing to take a number less than appraised value.
FYI, these days there are 2 appraisal numbers. A distressed, sell it in 60 days value, and a “normal” sell it in a year value. The bank is going to get the distressed appraisal number to use, which is substantially lower than the “normal” appraised value.
Ok, thanks for the reply. We will play along, for now, but our feet is our best bargining tool. Not like there are no other hosues for sale….
Steve,
For the property that has a HELOC as a 2nd, is the lienholder Chase? I am working with a client who has a HELOC on their home through Chase and we are still in the beginning stages of evaluating the potential short sale listing. What were the terms did they come back with in order to consider or approval the short sale?
Hi Steve, I am a realtor here in the valley focusing on short sales. I was wondering what your experience was with Countrywide and Chase. Did you have any luck with Chase and a HELOC? Please let me know how those short sales went, I have one that Countrywide is the 1st and Chase is the 2nd and it’s a HELOC.
Thank you, Heidi
Stephanie & Heidi,
A HELOC is not a mortgage, and the debt can follow the owner beyond a short sale. Owners that have HELOCs are potentially in serious trouble, and may actually need bankruptcy to wipe away the debt. It takes some serious negotiation, beyond the normal short sale process to deal with a HELOC, particularly a large HELOC.
Similarly for any type of cash-out refi where the cash was not used to improve the home, the new tax law changes will not protect that situation, and the tax burden may make a short sale an impractical solution. That too is very much a negotiating point that must be dealt with during the short sale process to protect your seller.
Answering the specific questions about Chase and Countrywide. Chase has been reasonably responsive (if you call an answer in a month, responsive). It appears we are going to be approved on 2 different Chase deals any day now. For the Countrywide listing, we just received our first offer (with a 2nd on the way), so that process is just starting. I’m expecting the Countrywide deal to take twice as long for approval as the Chase deal.
Steve;
I am a homeowner that has been sitting on the market since SuperBowl weekend - now a very stale listing. No showings since March 4 even though we dropped the price $30,000. We are VERY overpriced but we NEED to make the price we are asking to satisfy our two loans with GMAC mortgage. We are probably $150,000 too high even now. We are investigating short sales with our lender who, once I finally was able to speak with them both, was encouraging about our situation as long as we were up to date with our payments (which we are). They told me to mention in my letter of hardship that I was attempting to educate myself about the short sale process and that I am interested in promisary notes. Also, I have a better chance of success if I stay pleasant in my phone conversations with them and my correspondence. After reading this blog, I am questioning if the lender really sees me as a short sale situation. I’m finding this all so confusing…
Hi Jane, in our experience, the banks won’t take a short sale situation seriously, until payments stop being made by the home owner. Until payments are stopped, the bank believes there is no true hardship, and thus would likely deny any short sale offer.
Hello Steve. We placed an offer on a home in a short sale situation 8 weeks ago. The listing agent said that Countrywide was the one who was supposed to accept the offer, so we have been waiting while the house is still on the market and still being shown to other prospective buyers. Do you know if this is true? It seems to me that since Countrywide does not own the house yet that the owners should accept the offer contingent upon being able to negotiate a deal with Countrywide. My agent confessed the other day that her small agency did not have any experience in foreclosure type situations before this. I would appreciate any insight that you may be able to offer…Thanks!
Mark, the savvy of the listing agent, and their ability to “take advantage” of the buyer’s agent in this scenario plays out quite frequently. There are specific rules for when a listing should be moved to Active With Contingencies, and quite frankly I know those rules and use them to my advantage to keep the listing active, because that’s what’s in the best interest of my client. If I were representing a buyer in a short sale (and that’s a big if, as honestly, there are typically better deals, with less hassle, in the foreclosure market) I would know precisely what I wanted from the listing agent to get that listing in Active with Contingencies right now or my clients would cancel.
Steve.. really?
If the banks use apprasials to find out what they’ll sell the house for..
Why don’t you do a market analysis and set the price within 92% of it?
@Head Shaker- Oh, I certainly do a market analysis to price a short sale. But we all have to understand it’s my opinion of value, and it may differ from the bank’s person. We are finding that the banks really, really want to get the value that is found via appraisal. Their appraisals are fair, however, as they are doing distressed sale appraisals, which take into account the foreclosure activity and a desire to sell within 60 days.
So my team has 20 short listings in Tucson, I feel your pain. The best part is when you get that golden ticket approval letter from these banks and then the buyers dft. Ug …
I’m looking for new help. My seller has a 2ns with Chase heloc. Their phones disconnect if you call during peak hours which are monday through friday 9-5. I just need a stinking fax number to send all this short sale stuff ( 2 yrs taxes, hardship letter . etc … ) does anyone have this so I dont need to get up at 4am Tucson time to call these “people”
Sincerely,
Short Sales + Patron = survival
Katie,
Here are current contact numbers for Chase that should work. We have an approval from Chase as a 2nd lien HELOC for a short sale where $90,000 was owed. On the HUD-1 we showed that the 2nd would receive 10% of value and showed it to both the 1st and the 2nd. The 2nd just loved the prospect of getting that much while we are waiting to get final word from the 1st. I don’t think that anyone expects $9,000 to ultimately go to the 2nd, however, they are actively engaged and I believe will be willing to negotiate once the 1st finished their approval process. Also, keep in mind that the seller had their shit together and provided a thorough, well-organized financial analysis, hardship letter, and all supporting docs from day 1 which probably helped as well.
Chase
800-5766730
602-680-1469 Fax
Keep the Patron handy…
Hey, I just wanted to say thanks for the great response and blog! Never a dull day in real estate.
Sincerely.
The bottom line here, ladies and gents, is that the banks are not employing real estate agents to make real estate decisions. That’s why we’re here. They are hardly able to handle the load as it is and the employees who are assigned to handle case files have stacks numbering in the hundreds. So if you wonder why it’s taking so long, it’s because they just don’t know how to handle it yet. Granted, they’re getting better.
For those of you who are just not interested in taking Short Sales, hand’em over and I’ll cut you a referral fee. I love a challenge and my forehead isn’t flat enough yet, so I’m more than willing to take them on!
Jon-
You didn’t really just comment on my blog asking for business. Please tell me you didn’t do that…
Hi all,
What happened to Assumable Loans when an owner can no longer afford their mortgage and a uses their existing debt to offer a buyer the op to assume their loan?
It’s been a long time since banks wrote loans that could be assumed without qualifications. Even with qualifications, assumable home loans are quite rare. VA loans may be assumable, but until recently, those were also rare, as conventional financing was cheaper. MLS currently reports 174 assumable loan listings. However, spot checking a dozen of them, I found each of them looked like they were just entered in wrong.
Hi Steve,
I’m a buyer of a short sale. Unfortunately I have a real estate agent that is not well versed in Short Sales. The house I have an offer on was purchased for $395K. I believe it has a second mortgage. The market (comps) 2.5 months ago had the house around $200K. Upon the advice of my real estate agent, I offered market value + I pay closing. Now , there is an exact house that was listed a month ago at 191,900. The bank has given me a verbal ok obviously(still no paperwork) because i am about 15-20K above market value.
I was wondering if I can counter my original offer and what that counter offer should be.
Thanks so much ,
Kay
Hi Kay-
Because you are working with another agent, advice I give you could be considered me interfering with your current agency agreement. If your agent calls me, I could help them/you.
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