short

Tales from the trenches, a short story about short sales.

So far this year I have had three short sale listings, all 3 of which I sold.  Sounds great, doesn’t it?   However, of those three I was only able to close none of them…  that’s right, NONE OF THEM!  Why?  You ask?  Because the banks keep finding ways to get in the way…

My most recent deal collapse was just this Tuesday!  The bank representative (loss mitigation specialist) called me and told me that the bank had sold the property to HUD at a foreclosure auction 11 days prior!  This came as a shock to me, since I’d had multiple offers on this property since May, and had just received an “approval to participate in a shortsale” document package from the bank only 7 days before!  So, you can imagine my disbelief when I found out the bank had sold the property and THEN issued the approval to participate!!! 

It is important to note that the statistics are showing only 10% successful closing rates on short sale properties in general (of course it depends on whose stats you like).  So, I knew upfront that it was going to be a challenge. 

I don’t mind challenges, but I do expect organizations to apply logic to their problems when they are trying to solve them and I do expect that these organizations deal in honesty and good faith.  If you have no intention of honoring an offer then why put everybody through the wringer in the first place?  Is it a requirement of TARP money that you give the “appearance” of helping the consumer?  Also, who does it benefit to actually take the proerty back in house?  I know it doesn’t benefit the bank…

I had another fail when the second/third lien holder refused a payoff of about 23% of what they were owed.  Their reasoning was that their paperwork showed a 38% amount of equity available in the home!  So they actually bought the house at the foreclosure auction, paying the first lien their entire balance owing of 229K dollars!!!  Then they decided to sell the house themselves to get that other 15K they thought was in there…  long story short…  the house eventually sold for 236K!!!  So, not only were they out the settlement I offered them when I had it sold, but they were also out their costs of sale (approx another 20K) in addition to the absorbed internal costs of bringing in a house as REO, and holding it for months as a non-performing asset (which increases their reserve requirements with the FED)!

I am pretty confident that short sales can and do occur when they benefit everybody involved, it is just that recently I haven’t seen it happen (I successfully closed a couple last year).  If you plan on trying for a short sale property be sure to have an agent that has worked the system before, because this battlefield is tricky, full of mines and they keep changing the rules!

As always, I love hearing from you!  So drop me a note if you have any questions  bryan@seattlepowersearch.com.