Dear Michael: We are purchasing a short sale. Our agent told us that our offer was accepted by seller and chosen to be submitted to the short sale bank. Now the property is in foreclosure. According to our agent, the negotiator said this is a very complicated short sale and they are doing everything to get a deal together with us. The bank can accept our offer, reject, or counter it, but what can we do to speed up the process and secure the house?
Answer: As I am sure you know by now, short sales can be lengthily and complicated. You are correct that the seller’s bank (the mortgagee) can either: accept, reject, or counter your offer.
No matter what their ultimate response is, the wait time to hear back for sale approval can be between 1 to 6 months, and sometimes up to one year. Unfortunately there is nothing more you can do in order to expedite the process.
A few years ago, on occasion, properties pending a short sale approval would end up going through foreclosure. The Loss Mitigation department at a bank handles the short sale negotiation and the Eviction unit handles foreclosures.
Often, they are not even in the same state, let alone the same building. These two departments typically don’t communicate with each other, so it can happen that the eviction team will complete a foreclosure on a property while the seller (or their representation) is actively negotiating a short sale with the Loss Mitigation department.
This is unfortunate, but it can happen, though not as often as, 2007 and 2008 when short sales were new to the market. Banks have come a long way since then simplifying the process.
Dear Michael: I am purchasing a home and my Agent is telling me that it is time to remove my loan contingency. I am not comfortable doing so. Why must I remove my loan contingency? I plan on purchasing this home no matter what…
Answer: You hired your agent because you trusted him/her. Or you should have hired your agent because you trusted him/her.
If you appraisal came in at full value and all of the lenders condition have been met for your loan to be approved, then there is no valid reason why you should not remove your loan contingency. The seller needs a guarantee from the buyer that he/she is purchasing their home and means business.
The fact that you plan on “purchase this home no matter what” bares little security to a seller that vested his/her lifetime retirement on his/her home.
If there is minimal doubt from your lender that you may not be approved for a loan for whatever reason: hold off on removing your contingency. Be upfront with the seller and explain the situation.
Lenders requirements for loan approval can go beyond reasonable time. The seller has to understand that you are not ready to remove your loan contingency because of factors beyond your control. If the sellers don’t want to wait, he/she will give you a notice to perform (NBP) a removal of contingency at which time you can opt to either cancel the agreement or remove your contingency.
If you remove all your contingencies including your loan and decide to cancel the purchase, you could stand to lose up to 3 percent of the purchase price which most often means your earnest deposit.
Dear Michael: I am in escrow on a home and I found out trough my home inspection that there is a serious structural problem with the home. I am still within my contingency period. If I decide to cancel can the seller refuse to sign the release of my earnest deposit?
Answer: If the seller refuses to sign cancellation instructions and release o f buyer’s deposit during the buyer contingency period then the seller can legally be at fault.
You both need to sign cancellation instructions to release your deposit. If you have a Realtor representing you he/she will make the upmost effort to have the seller sign the release form in a timely manner.
The last thing the seller wants is to have their homes tied-up in escrow with a buyer that does not plan on purchasing it. It is not to a seller’s advantage to procrastinate signing the release form.
The seller will want to put their house back on the market as quickly as possible so he/she can work on getting the next buyer lined up. If a seller refuses to release the deposit then it would signify mediation and possible arbitration of dispute.
For the duration of the time it takes to resolve any discrepancies between buyer and seller, the seller cannot sell the home to anyone until the dispute has been resolved. It is essential for a buyer to satisfy themselves with the properties condition before removing the “investigation of the property condition” contingency.
Michael Kayem is a Realtor with Re/max /Execs serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310-390-3337 or email them to him at: homes@agentmichael.com