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Bank of America Achieves Surrealistic Central Status

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Maybe I should have titled this post, “Attention All Lawyers – Bank of America Has Lots of Free Money For You”.  What you are about to read might seem like something out of a Franz Kafka novel or a Salvador Dali painting that was somehow brought to life.  Only it is verified and real.

It is no secret in the real estate community what Bank of America does (and doesn’t do) regarding short sales.  In fact, typing, “short sales bank of america” into Google has this post right on the first page of Google.  Bank of America has routinely forced homeowners into foreclosure when a short sale was possible.  But when you read the next paragraph and get to the bottom of that paragraph – you will go back to the top and read it again because you will think you’ve misread it.  It just can’t say that.

In many instances – where a trustee’s sale has been postponed in order to complete a short sale – once the short sale is successfully completed and title transferred to the new owner – Bank of America then forecloses on the new owner.  Investors who have purchased the home at auction will then go the house, change the locks or in some cases break in to the home, thinking that the former owners simply haven’t moved out yet.

The following all happened in my office with my staff:

Apparently BofA has no system in place to cancel trustee sales after a short sale is completed. Our office is currently working on getting trustee sales canceled on 3 files that have closed escrow on a short sale with BofA recently. On one file we closed escrow 26th of January. The trustee sale was scheduled for February 4th and BofA would not discuss canceling the trustee sale until 2 days before it was scheduled. So on February the 1st (and 2nd, and 3rd) we spent over 5 hours trying to get someone at BofA to cancel the trustee sale. In exasperation on the 3rd day of this, we finally told them “go ahead and sell the house that you have no legal right to foreclose on and you can undo it after the fact”. At that point the supervisor urged us to calm down that they wanted to work it out and they couldn’t understand why no one was doing anything.

They told us that Recon Trust (their appointed trustee for sales) charges them $3800 per foreclosure and that they didn’t want to pay that to foreclose on a home that was already sold. We had already spoken to Recon Trust trying to provide copies of the HUD1 that showed the sale had been completed a week ago, but they will only take instruction from BofA (plus there is that $3800 per trustee sale – legit or not). So far we have gotten called off 2 of our 3 homes that are closed but still scheduled for a trustee sale. This has taken hours and hours of our time to get BofA to do a job that is theirs to do. Buyers are reporting notices of sales being posted, investors trying to break in and look at their homes, etc. all because the trustee sale is not halted. The only bank currently doing this to our knowledge is BofA.

Maybe someone from Bank of America reading this could alert someone in a position of authority to actually DO something about it?  I know a whole bunch of people who would be very grateful.

Russell has been an Associate Broker with John Hall & Associates since 1978 and ranks in the top 1% of all agents in the U.S. Most recently The Wall Street Journal recognized the Top 200 Agents in America, awarding Russell # 25 for number of units sold. Russell has been featured in many books such as, "The Billion Dollar Agent" by Steve Kantor and "The Millionaire Real Estate Agent" by Gary Keller and has often been a featured speaker for national conventions and routinely speaks at various state and local association conventions. Visit him also at nohasslelisting.com and number1homeagent.com.

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27 Comments

27 Comments

  1. Benn Rosales

    February 11, 2010 at 12:13 pm

    Disturbing report to say the least, I predict buyer disclosure notices updated to buyer beware of the short sale purchase you’re making and the nightmare that may follow.

  2. Justin Boland

    February 11, 2010 at 2:43 pm

    This article could definitely use a better — or at least clearer — title.

    Although to your credit, the biggest reason I read this was just to understand WTF the headline even meant. So then again, maybe you did right.

  3. velda

    February 11, 2010 at 2:59 pm

    I know exactly what you are talking about because one of my agents had to deal with BofA thru a listing agent. The home was listed, her buyers offered, owners countered and eventually they agreed on a price of something like 92 or 96K (don’t remember the exact amount). Owners agreed but then BofA didn’t agree and wanted 112K. Buyers walked. Home was foreclosed on. House was later listed by a different agent (but same company) for 89900 and it sold for 87750.
    Banks do stupid things.
    I had a REO property about a year and a half ago. Originally listed at 174,500. It was reduced to 164500 after a month. In the same week, we had 3 offers – one for full price and 2 for 160K – all qualified buyers. At the same time I submitted all the offers, the bank came back and said that all offers were on hold. Well, they were on hold for about 2 weeks, all 3 buyers withdrew their offers. The bank then put the home on auction with realtybid and it sold for $115K in about a week-10 days, the buyer’s agent and I were both paid but with the difference in the other three commissions and the final at 115K was a considerable chunk of money on my side!

  4. Lorraine

    February 11, 2010 at 3:11 pm

    Bank of America is a total nightmare to deal with. Thanks for the article and it doesn’t surprise me at all. When I’ve called their provided number for a short sale to help a client, I never got the same answer!

  5. Jim Gatos

    February 11, 2010 at 8:51 pm

    Between BOA and Wells Fargo, I REALLY feel badly for people who’ve dealt with them.. They really are semi evil or just bad news.. I can’t tell you the headaches they’ve given my clients and myself..

  6. nancy deichman

    February 12, 2010 at 2:42 am

    Bank Of America is the worst Bank in America. They are responsible for the fiancial ruin of many homeowners through their neglect and abuse. They have lied to many homeowners, giving them modiifications and then changing their mind, even after paperwork is signed.
    They cost their investors milliions of unnecessary losses by ignoring short sale requests at market prices and then foreclosing and selling the properties for much less.
    They should have their current servicing of loans revoked, and drown in their own vomit.

  7. Richard Johnston, Realtor Sherman Oaks ReMax

    February 13, 2010 at 3:51 am

    Wow…disturbing. If I was the buyer of that home, I would sue bank of america for continueing to foreclosure on a home no longer owned by them. Unbelievable but then again, banks are surprising us all the time with nonsense.

    Let’s just be happy that they never got into real estate. Imagine what would have happened…

  8. Joe Loomer

    February 13, 2010 at 10:05 am

    Russell – this is classic BOA – had a case here where they even offered Vendee financing, closed, then STILL foreclosed on the new owners – even though they owned both notes

  9. Anonymous

    February 13, 2010 at 8:27 pm

    Russell, great story that had to be told. I rarely comment on blog posts, but yours struck me, because I happen to know an SVP with Bank of America. Don’t hold that against me, though. She is currently working on the B of A / Countrywide short sales and foreclosures team. After reading your post, I immediately forwarded it to her, and asked her for some input. She said that she knows of a project within the team, dedicated to re-engineering the short sale process. So, she said she forwarded your post to someone she knows working on that project…not, as she put it, “that they don’t already have a folder full of” stories like this one. I have to tell you, she was not full of excuses or ways to displace the blame like everyone thinks B of A executives are prone to do. Her emailed response to me was full of heartfelt regret, and a desire to right this very large, sinking, ship. Maybe it’s just because I know and trust her, but I think there’s more good guys at the top than bad.

    • nancy deichman

      February 14, 2010 at 3:22 pm

      A folder full? They should have a 400,000 sq ft warehouse full of complaints like this one!
      Every client that I am trying to help that has a loan with serviced by Bank of America cannot get answers. We lose buyers that get tired of waiting and move on to a home they can actually close on. Bank of America should be banned from the mortgaging service business all together. They call it servicing. That’s a bad joke. Who are they servicing besides themselves? They are creating huge losses for the real investors by their negligence, and they are causing enormous financial distress on homeowners who are forced to have them as servicing lenders. There is no excuse. Their activity is downright criminal.

  10. Russell Shaw

    February 13, 2010 at 10:59 pm

    To the person who sent this post on the B of A SVP, THANK YOU! That is exactly what I hoped would occur. I don’t believe that B of A employees are “bad” or don’t care. I believe they sincerely want to change what is happening and will eventually do just that.

  11. T. Albea

    April 14, 2010 at 3:12 pm

    I want my hard earned tax payer money back.

  12. Maricopa County Trustee Sales

    June 14, 2010 at 3:28 pm

    Worthy of Note: B of A was recently granted permission to sell a grip of their shadow inventory… Don’t know whether that means foreclosure supply was impacted enough by Fed incentives…

    I guess it’s not terribly hard to imagine some slippage in tracking and handling such a massive amount of defaults, non-judicial foreclosure proceedings and short sales…

    Not really surprised that it’s B of A getting hounded for reconciliation errors…

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Coaching

Disputing a property’s value in a short sale: turn a no into a go

During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!

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magic eight ball

It’s about getting your way

Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?

When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.

After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.

Value Dispute Process

While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.

  1. Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
  2. Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
  3. Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
  4. Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
  5. Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.

It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.

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Coaching

Short sale standoffs: how to avoid getting hit

The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:

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short sales standoff

What is a short sale standoff?

If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.

Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.

Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.

How to Avoid the Standoff

If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.

Here are some ideas for how to get out of the situation:

  • Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
  • Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
  • If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
  • Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
  • In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.

One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.

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Coaching

Short sale approval letters don’t arrive in the blink of an eye

Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.

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Short sale approval: getting prepared, making it happen

People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.

Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.

Experience dictates that agents that learn about the short sale process
have increased short sale closings.

Short sale education opportunities abound

There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:

  • Classes at your local board of Realtors®
  • Free short sale webinars and workshops
  • The short sale or foreclosure specialist designations

As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.

The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.

Don’t take on too much

And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!

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