We have been selling a lot of homes in Short Sales. A Short Sale is one in which the net proceeds after the sale are not enough to pay the mortgage and the bank agrees to the lower amount in order to close escrow.
For each individual, whether to do a Short Sale or not can be a different answer. We refer all of our clients to an attorney for a FREE 15 minute consultation to give the opportunity to answer the legal questions and decide if a Short Sale is right for them.
Recently we had a Short Sale approved through Countrywide Bank. However, our buyer had purchased another home. We put the home back on the market and secured a new offer. We re-submitted to the bank for approval. Due to the Bank of America take over of Countrywide, we could not get a quick approval. The transaction was now being considered through B of A new rules. They ultimately denied the Short Sale.
Bank of America’s new rule has to do with the sellers situation. From what I have been told, if the seller is current on everything else then they want the seller to carry a note to approve the sale. In some situations, this is reasonable. One of my clients just approved a $190 payment over 100 months, thus $19,000 paid back. But truly this is an interest free loan.
In the situation I have mentioned in the title, the seller had 10 other properties and thus Countrywide/B of A wanted the seller to carry $50,000. This seller is an investor. He put $200k down when purchasing the home. His financial situation has deteriorated badly and being in his 70’s he is ready to move on with or without a foreclosure but for sure without a $50K note. He does own 10 other homes, but most are upside down.
The bank rejected the $565,000 cash offer in a short sale and sold the home at the foreclosure sale for $460,000. Over $100,000 less. This does not make sense. You see the investor now has a foreclosure on his name and is beginning to question why he is paying the negative on those other 10 houses. Not only did the bank walk away from $100,000 but they may have motivated another 10 future foreclosures.
This is just one example of 1,000’s regarding banks deciding to take less money because they prefer to give the borrower a foreclosure on their credit. There have been millions of foreclosures, when 3% of the people have a foreclosure it is a big deal. When 40% of the people have a foreclosure it loses the negative impact. Plus, in many cases, once the borrower has one foreclosure, they have to start over with a BK and thus throw the rest of their properties into foreclosure. This means less money to banks and more future foreclosures, where is sense in that????
Just my opinion…Jeff Cameron
480-652-2004