Short Sales ala Bank of America

The same is equally true of short sales.  Unfortunately, many in the banking industry make Forest Gump look incredibly insightful.  I try to tell both buyers and sellers this whenever possible.  Unfortunately, as I have consistently stated the general rule with short sales are there are no general rules.

I recently had two mirror image properties (side by side townhouses in the same development) go under contract.  The first offer which was approved closed at $199,000.00 through Bank of America.  The following week an identical offer was submitted for the identical next door property with the same lender (Bank of America).  Ironically, the bank countered the second short sale at $239,000.00…Yes $40,000.00 more!  The seller and the buyer were fit to be tied as well as the realtor.  The deal fell apart and the file was closed.  The bank gave no explanation so I started my own investigation.

Turns out, the first property was in default and the borrower on the second property was current.  The bank was motivated to get the first loan off their books because it was a “non- performing loan.” For every non-performing loan a lender must set aside a certain amount of reserves.  With the second borrower/seller, the bank had no motivation.  In fact, they did not want the property to sell and reasoned since the seller had shown an ability to weather the storm of the past few years perhaps they will keep it current until the market turns around.

A similar but different situation occurred with another lender.  In this case we had virtually identical properties.  Both parties were similarly 120 days late in payments and on the verge of having foreclosure suits filed.  Identical offers were brought on both properties.  One offer was accepted while one was not.  A further investigation revealed that while both properties were appraised by the bank at the same price one offer was approved and the other was not because Wells Fargo was dealing with two separate investors who had different guidelines for short sale approval.  No one gave the parties the memo up front and it was extremely frustrating to watch one close while the other fell apart.

The reason I am sharing this with you is to help you create and manage the expectations of your buyers and sellers.  The key to short sale success is two-fold.  First and most importantly, price is the biggest factor. The closer you are to true market value the greater the likelihood of success.  However, even if the price is right, the short sale may fail for undisclosed reasons, which leads us to the second point.  It is important to create as well as manage both the seller’s as well as the buyer’s expectations when submitting short sale offers.

Be honest and upfront.  Short sales are neither a science nor an art and unfortunately as much as we work them, they may not always work.  What we can do is advise our clients as best as we can based on experiences that we have encountered in the past but at the end of the day… short sales are like a box of chocolates…you never know what you are going to get.

Law Offices of Ronald S Webster

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