Anyone ever have the short sale deal that makes sense collapse, only to see it go to sale via the foreclosure process and sell for less?
OK, that was a stupid question. But have you ever looked into why it didn’t work out when there was no apparent reason for it not to close? You know, the deal where even the contestants on “Are You Smarter Than A 5th Grader” could do the math and conclude that it is in everyone’s benefit for it to be approved and close?
While the White house continues with the “you ought to be ashamed of yourselves” lecture, they are still cutting backroom deals with the financial world via the FDIC every time they take over a failed bank. This means that its possible the owner of the note, which isn’t likely the loan servicer you are negotiating with, may have a financial incentive to let it go to foreclosure. The foreclosure may end up with a lower net to the lien holder, but what you may not know is the guarantee from the FDIC can mean a huge windfall.
Denver real estate broker Larry Hotz had one such situation. His clients wrote a full price offer. They ended up getting the property, but not via the short sale route, and for less money than they originally offered. Here is his account of a short sale gone sideways, where the lien holder made a profit of over $150k, and one reason why the FDIC estimates that bank closings will cost the taxpayers an estimated $100 billion from 2009 through 2013.
“If you had any doubts at all about the primacy of Wall Street over Main Street, your doubts should be laid to rest.”
Former Clinton Secretary of Labor, Robert Reich, November, 2008
The talking heads keep on talking, but at the end of the day, those living within the Beltway and those living on Main Street are still at the mercy of Wall Street. It isn’t a partisan thing as some on both sides of the aisle claim, while pointing at the other. It is just the way things are. Wall Street permeates politics. We all know how Wall Street made bank under Bush, but as Matt Taibbi of Rolling Stone illustrates in the article “Obama Big Sellout“, it isn’t changing under the current administration either.
Paula Henry
December 14, 2009 at 1:29 am
Bob – You have hit on a “sore” subject with me and I’m certain many more agents. I read this article yesterday and just shook my head. While the government is telling homeowners they are ready and willing to make the banks help them, they make deals behind their back to make it most difficult and trying to get past the person answering the phone.
BawldGuy
December 14, 2009 at 12:49 pm
I explained this exact dilemma to a client over the weekend, whose sibling was in trouble. When folks see this explanation, (yours btw was much mo betta than mine) there are several ‘aha’ moments. When I told him his brother was negotiating with the wrong folks, he was livid, but happy to at least understand.
Glenn in Naples
January 6, 2010 at 7:36 am
Bob and Larry – good articles however there are questions on the seller side that could impact why the potential short sale never got an approval.
– Was there a BPO done and the estimated market value come in higher than the full price offer?
– Was the seller offered a settlement by the investor, which was rejected? There are strategies that do allow the seller to be in a better position than the settlement offered.
– Did the seller have resources to cover part or all for the short?
– What income does the seller have and where is it going?
– Were there other liens against the property and the lien holders not able to agree to their piece of the pie? In one case I found 7 lien holders on a property and 2 were superior to the first mortgage.
– Did the lien holder of this property communicate with the attorneys handling the foreclosure?
There are just too many questions on the seller’s side which may not have been answered to result in this situation.
Just my 2 cents.