Wow… today marks the first day in over six months that I don’t have to deal with Bank of America on a Short Sale… I feel eerily lonely for some reason. The agent representing the buyer and I have joked about the depression of a “break-up” as we’ve talked, texted, emailed, and vented together for 6 months.
In the beginning…. Yes, it was that long ago that this tale is deserved of a start like this… we had a home that was in disarray. And this isn’t the typical short sale where a buyer has come across some unexpected financial hardship, or simply overextended themselves on a mortgage that was doomed from the beginning. This is a sad story of sorts. The “seller” wasn’t even the borrower… or co-borrower… in fact, she had nothing to do with the loan itself. The unfortunate circumstances that brought us together are worthy of a prime time special. The borrower was her brother. A young, seemingly healthy man that died unexpectedly of a blood clot in January of 2009. The home was shared between he and his parents. Upon his death, his mother went into a deep depression, understandably. Her depression was ultimately ended by a sudden heart attack in June of 2009. She and her husband had been trying to keep up with the mortgage, and were seeking a modification under the Making Home Affordable plan. Less than a month later, the father was tragically killed in a car accident.
It was March of 2010 when the young woman came to my office in need of help and direction. We immediately began to look at what the options were; however, she cautioned me that before we even thought about the value of the home, we should visit the property, as it hadn’t been maintained in nearly 9 months by this time. We set an appointment to go out to the home and walk through. She met me there accompanied by her aunt, and profusely apologized – embarrassed – for the condition of the home.
The home looked as if it had been ransacked – as in some ways it had been. There were burns in the carpet from cigarettes, stains, no appliances, no utilities. There was no way that the home would sell in this condition – let alone make any kind of profit for her to start anew. I immediately began to think who could help and how… As the Assistant High School Wrestling Coach, I knew that the strength of my team, and the wrestling community is where I had to lay my hopes. And, they delivered!
Within one week of listing the property, we had the team out with a 3-ton dumpster and removed EVERYTHING from the home. When I say everything, I mean carpet and all remaining personal affects. We did this in one day. Over the next weeks, I continued to go out, strip wallpaper, mow the grass, turn on utilities, and get the home ready to show for the right buyers.
Prior to listing the home, I contacted Bank of America and got a verbal payoff. We priced the home so that the payoff would be satisfied, and the seller could walk with about $5k for her and her 18-month old daughter. After about one month, we got our offer! We accepted the offer and began planning for settlement at the end of May.
I ordered the payoff from the bank to find out that Vacancy Insurance had been placed on the home back to March of 2010, at the rate of $500 per month. The payoff came back at $149k; however, after prorating the taxes, insurance, etc, we were looking at about $142k. My heart sank. I called the bank and asked how the number they had given me had gone up $17,000, only to be give an “Oops.” Sick to my stomach I went and informed the seller that there was no equity in the home, and we’re looking at a short sale. However, we should get this done, because to the best of my ability, I calculated the sale was only $4200 short.
This is where it imploded… the bank ordered a BPO (Broker Price Opinion) which is basically an appraisal. The due date for the appraisal to be completed was June 2. On June 14, I received a call from the bank that they needed to go back out and take interior photos, due to a “camera malfunction.” The BPO was finally completed promptly on, or about, July 6. Now, with a $25 per diem interest charge, and $500 per month insurance – on top of the $300 per month in taxes. And, let’s note for the record, this was scheduled to settle on May 30, and then moved to June 15. So, at the point of the appraisal being completed, the bank and investor (Fannie Mae) had incurred an additional $1,500+ in costs (or about 35% of the “short”).
Negotiations began in early July and continued until the end of August – at which time the offer from the lender “expired” as the negotiator failed to answer questions pertinent to the deal. So, we start over… but luckily, the BPO is good for 90 days! However, everything needed to be initiated from the beginning and it took until the middle of August until we were assigned a negotiator – Diane Keen. I only use her name here because she is solely responsible for getting this done. The stumbling blocks on the previous negotiation were the amount of Seller’s Assistance (6% – only 3% is permitted by Fannie Mae) and repairs paid for by the buyer ($5100 in flooring). The sum of the “obstacle” at this time – $10k.
Diane Keen contacted us to say, “We can get this done!” They reduced the Seller Assist to 3% and kept the repairs at $5100. Therefore, the bank is getting $4950 more than originally offered – however, if this had been the original offer, it wouldn’t have been a short sale (originally $4200 short). All of the sudden, Bank of America pulled this from Diane and put it in their HAFA program. We were in this program for about a week before someone spoke to me on the phone. Turns out, the property wasn’t eligible due to it not being the primary residence of the seller (recall THEY had put vacancy insurance on this in March…).
We were then assigned a new negotiator who was… hmmm….. let’s say, not nice. She was adamant that Fannie Mae did not allow for repairs and that Diane Keen was a “temp” and didn’t know what she was talking about. At the end of August, she deactivated the file because “we” were unwilling to listen to her, and we were insisting on the repair money.
In September, Diane got the file assigned back to her… we got the approvals after weeks of run around and promises of “tomorrow” from the Bank. Fast forward to October 6th – we got all of the approvals (thanks to Diane) and got the deal closed Friday the 8th – WITH the $5100 allowance.
The bank ended up walking with $145,050, instead of the $140,100 we had originally offered. They “made” another $4,950. REWIND – the carrying cost of the home was about $50 per day with Interest, Tax, Insurance. So, after about 4.5 months (135 days), the bank cost themselves $6,750 to save $4950… I don’t know what kind of math that is – but it is now increasingly clearer how these banks continue to get themselves into trouble… and even more evident how Fannie Mae is failing.
On top of all this – as I said, this wouldn’t have been a short sale at these numbers in May/June. One would ask then, why not just make that offer then… well, the bank lucked out here – yes, lucked out that they ONLY lost $1800. Had interest rates not dropped from 5.25% in May to the low 4′s in September/October – this wouldn’t have happened. You see, the borrowers “bought up” the rate to get cash back from the lender…. confused, then you need to ask me about buy-downs and buy-ups with mortgage rates.
So, in summary – the only thing short in a short sale are tempers.