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 longer.
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. 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 informing 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. If your appraisal came in at full value and all lenders condition are met, then your loan is approved. There is no reason at this point to why you should not remove your loan contingency. The seller needs a guarantee from you (the buyer) that you are 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: hold off on removing your loan contingency. Be upfront with the seller and explain the situation.
Lenders requirements for loan approval can sometimes go beyond the agreed time. The seller will have to understand that you are not ready to remove your loan contingency because of factors beyond your control. If the seller does not want to wait, he/she will give you a notice to perform (NBP).
If you receive a NBP, you can opt to either remove your contingency or cancel the agreement. If you decide to remove all contingencies including your loan and then should decide to cancel the purchase, you could be liable to forfeit your earnest deposit, which usually is 3 percent of the purchase price.
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 of buyer’s deposit during the buyer contingency period then the seller can legally be at fault. You both need to sign the 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.
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 Estate Properties serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310- 390-3337 or e-mail them to him at: homes@agentmichael.com.