Short Sales & Loan Modification Horror Stories: Q & A Session

Hundreds of thousands of real estate agents and homeowners are running into trouble closing their short sales & loan modifications.  Here is your opportunity to share your thoughts and concerns on your short sales/loan modifications.  Feel free to ask as many questions as you’d like.  Who knows?  You might discover just what you need to save you or your client’s home from going into foreclosure.

Questions to think about:

Are you having trouble with any particular lender?  If so, who and why?

Is the lender not accepting your short sale even if you believe it is full price? 

Are lenders giving you the “run around” with their loss mitigation department?  Are you having a hard time reaching somebody who can help you? 

Have your local HUD agencies been helpful assisting you with your loan modification?

Have you had any bad experiences with non-profit/for-profit loan companies?  Bad experiences with short sale agents or negotiators?   

Are you having a hard time holding onto buyers for 3-4 months until short sale approval?  What have your been experiences been like with the lender once they know the buyer is off the table?

Is the lender being frustratingly persistent about charging your homeowner with a deficiency judgement or note for the difference between your sales price and the loan amount? 

Just some questions to get you thinking.  Post away!

Written by SSB

17 Comments

  • Hi there,
    I read much of the information on this site, and appreciate the way it is presented. As an escrow business, we are seeing more and more short sales, and find them to be a little exhausting, but very much worth the hassle for sellers, buyers, banks, and brokers. On the surface, it appears as though the banks would not be willing to negotiate, but they are collecting on a debt which in most cases is very close to what is owed them.
    I am also happy to see certain laws protecting the homeowner from scammers. In my years here at Shannon escrow, I have only seen a handful of scams, as we keep our afifliations clean.

    I also just wanted to add a short bit of info. In a short sale, a HUD statement is required for the agent or negotiator to present to the underlying lender. Until recently, escrow companies had to wait for all of the information from the sellers in order to create a HUD. We have devised a new method of getting this information at the time the selling agreement is made, and can now produce a HUD within hours instead of days. This is our little part in helping distressed homeowners. We also noticed that all escrow and title companies are charging up to 250.00 dollars for a short sale. Again, we do not believe in this as our escrow fee is supposed to cover everything…..including short sales. Shame on them for making extra profits from a distressed sale!
    In any event, I am not trying to sell our services, but appreciate the blogsite. It is interesting.

    Reply
  • I can’t even express how important it is to work with an escrow company that knows how to handle short sales. I was at a point with one company where I was literally making revisions to the HUD myself because their agent was “tired of working on the file.”

    Realtors, choose your escrow wisely! Thanks for your comment Dave.

    Reply
  • Thank you for posting these articles and comments. This is very good and current real estate information. We do short sales full time and always appreciate somewhere new to go for upto date information. We would be happy to provide any information we have on short sales and agree with the escrow comments. We use two escrow companies exclusively and appreciate our business relationship with them as short sales are not easy for escrow to process if they do not understand the terms of approval letters.
    Thank you!
    Team McFarland/Mike McFarland’s Team
    Coldwell Banker Bain

    Reply
  • now is def. the time to work wisely and to be weary of all foreclosure scams. The laws that have been put into place are definitely a well thought out process.

    Reply
  • Nice, very informative post. Thanx.

    Reply
  • The biggest problem we have is when the Lender calls our client while we have a pending offer on a short sale and asks if they want to do a loan modification. Twice now this has happened and as soon as our client says yes, even though they had already been denied a loan modification, it cancels the short sale. After about 3 weeks, they get denied again and we have to start the short sale process all over but now the buyer has moved on and we are left looking for another buyer.

    The Lender each time told our client it would not affect the pending short sale which was not the case.

    These Lenders definitely don’t make things easy.

    Reply
  • Tony,

    I agree with you. Lenders lie to their customers all the time. “Pay your arrears in full and we’ll consider a loan modification,” or “We will never, ever accept your offer, the investors will not allow it,” or “We will proceed with foreclosure unless you make just one payment, JUST ONE PAYMENT, c’mon do it.” lol. I’m obviously exaggerating but I’ll tell you, I’ve heard it all.

    Reply
  • Kevin,

    I know what you’re talking about, as I was lied to over and over again by Wells Fargo’s customer service reps in the same way. I was 3 months behind on a 220k loan with Wells Fargo and they would not give me a loan modification. I did, however, work with a rep named charles oh at lincoln national and he got me a full loan modification like he promised me. They charged me some money but a lawyer represented me and this guy saved my house. No guarantees they make, but they are so good, took them 104 days, but today I am at 4% fixed from a 8.75 adjustable, and my past dues are all current again.
    e-mail me for more details on guy, or here’s his signature, oh my god, I was skeptical but he saved my house from a short sale!

    Charles Oh
    Senior Counselor – Vice President
    333 Willow Street – Suite 100
    Teaneck, NJ 07666
    Work: 646.388.6159
    Fax: 201.503.8154
    Email: Charles@theLNgroup.com
    http://www.theLNgroup.com

    -Andrew

    Reply
  • I just wanted to post our story and hopefully get some feedback. We are currently at a very interesting juncture in our home buying process. We put an offer in on a Short Sale in May and have since sold our house and moved out. We are staying at our recreational property at this time. The offer we put in was the only offer on the property, it is at aprox 90% of the loan amount that is owed on the first mortgage.. the second and third having been dismissed already. Things were clipping along and then last week, we are in Phase 3 and they told us that we would hear nothing for two weeks. The auction date is July 10th and they have not postponed it. We have been waiting to get the approval letter on our offer since Early May.. and I am beginning to get a bit nervous. We have been told that people will wait until a couple days before the auction and submit an offer, and or that the bank will wait until the day before the auction to approve, or that they will wait and see what they can get at auction before accepting the offer. I find this very crazy. Our offer is higher than the BPO, it is the only offer they have, and we are dream buyers.. strong credit, NO debt ratio, cash in hand, no contigincies.. I just don’t get it. It is very very frustrating. The only reason we have not moved on.. is we can’t find anything else we like as much as this house..

    Reply
  • Hey Kris,

    If your offer is truly above the BPO amount, the deal should be closing. Who is negotiating the short sale? What are they saying?

    If you really want help, have the listing agent and his/her negotiators call/email me. You need to “escalate the file,” meaning that you need to use techniques to get the loss mitigation department to place YOUR offer on top of their 500 page stack of short sale packages/offers/affadavits,etc.

    Kevin

    Reply
  • I viewed a house 3 months ago and was going to place an offer then found out it was going under contract. Well I kept look and 2 months later my agent tells me this house is back on the market and it was a short sale that did not go thru. The buyer backed out. I place my offer and the selling agent tells us it should close fast because they were in the final round when the last buyer backed out and my bid is slightly higher than the first. All sounds good right? Well, 5 weeks later and not I am still waiting. i have learned the first lender has signed off on the deal but I am waiting on the second lender to approve. Running out of time for the first time buyer incentive

    Reply
    • Bankrate isn’t a fantastic scoure, as my rates are always better than what they offer, and rates can change on a whim (we had 4 reprices today w/most of my lenders).Also, the Fed cutting the rate usually forces rates upward, as inflation becomes a concern, and mortgage bonds despise inflation this is not the case this time as there was a global rate cut to stave off inflation.Your best bet is to have a lender/broker you can entrust. One thing about life with a bank is that once you’re locked in, you’re locked in. With a broker, you can switch lenders if pricing improves. They were right in that rates took a large hit today, but things should settle down and go right back to everywhere they were shortly possibly even lower as the election gets quicker (pun how that works).

      Reply
  • Kevin,

    Update here. We had given up on the short sale property we were trying to buy, as we put our offer in Last May.. didn’t hear anything through July, and we were set to close on another property. All I can say is.. thank goodness we didn’t sign a recession. The NON short sale property we were set to close on had boundry line issues and couldn’t close properly.. so at the end of August we found out we were approved to buy the original short sale property. It has been a long process, and not without issues and frustrations. We should close in the next week. Another question though.. is anyone finding issues with closing on short sales due to appraisal repair issues? We are having to do a escrow hold back. We are going conventional, fixed 30 year. As borrowers, we don’t get any better.. no debt, credit scores above 720, 10% down. But.. the property has been vandalized since our initial offer. Two appraisals called out repairs. The homeowner will not and can not do them (no resources at all), and the bank will not as they do not technically “own” the property. With the new laws and rules around appraisals is anyone else finding these issues? We were all set to close, but if the property does not appraise at “average” condition or better, Fannie Mae will not allow the loan to be sold. I would anticipate this being a problem for more than us. We can afford to do the escrow hold back, but can first time home buyers? Luckily ours will only be in the 6-10k range of hold back. Some of the properties we have toured though.. that figure could go into the teens and over 20k of repairs. How are others dealing with this?

    Thanks again,

    Love the blog

    Reply
  • Kristie, I hope Kevin has some thoughts on your post. I’m representing a buyer on a short sale and we actually anticipate having the appraiser call for repairs. We will most likely be doing an escrow holdback as well although we are going to try to get at least some credit for the repairs at closing. In our case it’s a big broken porch slab, obviously done in a hurried fashion in order to pass inspection with the county. It’s a large amount – $10k for the bare minimum, plain porch.

    I agree, there has got to be a lot of first time homebuyers out there that don’t have the funds to make required repairs. It has got to be a frustrating process when you wait months for approval and then can’t proceed because of costly repairs that only the buyer can pay for.

    I don’t know when you posted your update but I hope your closing went well. What an ordeal!

    Reply
  • Kristie,

    I would analyze the property, consider you return on investment and if, with an additional 10k down, you are still purchasing the property at a considerable discount, only then would I move forward. Furthermore, you may want to use this as leverage for negotiating the purchase price down. Do not actually begin working on the property until you obtain a short sale approval for the discounted purchase price.

    If you’re going to buy property, buy it a considerable discount. Excellent purchases are always worth the wait.

    Reply
  • I bought a house about four years ago as a single parent. My daughter has since graduated and moved out. I got married about two years ago. He owned a small house so we rented it out and are living in my home (which is still in my former name). Due to the downturn the house we’re in has reduced drastically. The house accross the street sold after over a year on the market for over 120K less than mine. Granted it’s a smaller square footage but not that much.I lost my job and have been contracting so I don’t have the steady income anymore. Although my new husband is covering the rent it is considerably higher than what he previously paid and the neighborhood is steadily declining. Since the mortgage is in my name would my new husband be affected if opted for a short sale or the deed in lieu of foreclosure? If the bank accepted a short sale or deed would I need to file for bankruptcy. My income isn’t steady and we can’t afford a big tax bill. What are your thoughts?

    Reply
    • Hello Vee,
      It looks like your circumstances will suffice as a legitimate hardship for a short sale. If the home is solely under your name, then your husband will not be affected in any of the given circumstance. Whether it is a short sale or foreclosure, you will incur a ding on your credit score and have one or the other reported on your(and yours only) credit report.
      You do not have to file for bankruptcy if the bank accepts a short sale or a DIL of foreclosure although you have the option to, post any of those occurances.
      Most likely, you should not have to pay taxes as this is your primary residence and you are under the mortgage forgiveness debt relief act. I would verify this with your attorney and/or CPA.
      If you have any other questions regarding short sales, foreclosures, or credit, please read the articles on this site and feel free to email me at Peter@seattleshortsaleblog.com
      Hope this helps.

      Reply

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