You must be wondering if I have given up on blogging. I haven't- it's just that we have so much going on. We just got home from our vacation a few days ago and have yet to unpack. If this trip is anything like all my others we will just wear the clothes out of the suitcase until it either empties itself or we need to empty it to go on another trip.
Oh yeah- and the best part yet- we have moved into Phase Two Negotiation with the seller's bank for the new home we are buying. So of course this means so many things- it means that I really need to get serious about packing now. The one box I have packed from the junk under the bathroom sink isn't going to get us very far.
We have tenants for our current home and they have already signed the lease- we were just hesitant to sign it ourselves not knowing if Countrywide was even going to let the seller short sale the home. The only problem with the lease is that they want to take possession of our home by September 1st in order to get their kids all settled before it gets too far into the school year- something I can definitely appreciate. We are 99% certain that the new home won't be closing by September 1st so it is sounding like we will be moving twice, a prospect I am not even remotely excited about.
I have been terrible when it comes to googling things with regards to short sales. I could liken my habit to when I used to google everything about pregnancy. The problem in both cases is that no one ever posts anything positive- all you ever hear on those chat boards is everyone's negative experience. And then of course it is oh-so-easy to compare your situation and think that yours will also turn out that way.
So anyway- if you are interested in hearing about how the short sale process works let me share how ours has gone.
May 7th, 2009- the home was listed on the MLS.
May 9th- we made an offer at list price and asked for 3% seller contribution to closing costs.
May 11th- seller accepted offer with no counter offer.
May 22nd- short sale negotiation team working as a mediator between bank and seller submitted seller's short sale packages to both of their lenders (Countrywide and E-loan)
June 23rd- E-loan fully approved the short sale
June 29th- Countrywide finally assigned the paperwork to a Phase 1 negotiator. We were told Phase 1 would be 15 days but considering they had the package for over 30 days before even assigning it I felt it would likely be closer to 30 days for phase 1 also. Phase one is where they review the sellers need to do a short sale. Not everyone qualifies to short sale their home- if the bank determines that you have the financial ability to pay for your home but just don't want to then they will reject your short sale request. Similarly- if the seller still lives in the home and wants to retain it you might find that during the short sale process the bank will find a way to work with the seller to modify their loan and keep them in the home. In our case the seller has already relocated out of state- so I didn't worry about that.
July 17th- we got notification that Countrywide moved the file to Phase 2 negotiations. This means that the seller must have had all of their paperwork in and that Countrywide did see that the home was best to be short sold. I don't know exactly how long Phase 2 will take but since I am in the mortgage business and I have seen plenty of short sales being financed by the new buyers I have seen some communication that Phase Two with Countrywide is *supposed to* take 60 days. Phase 2 is where they order the BPO (broker price opinion- similar to an appraisal). Once they have the BPO value they determine if they are going to accept your offer.
I feel pretty confident- the home was listed fairly with regards to other comps in the neighborhood and we offered list price. Be forewarned- don't think that on a short sale you are going to be able to go in and offer the bank even less than fair market value. Just because they are allowing the seller to short sale does not mean that they are going to take any more off the price than they already are. I have read numerous posts by people that offered just under what the seller was asking for list price and either Countrywide rejected or never replied to the offer. I suppose it was because the offer might have been an insult to them. Just keep in mind here- this is a business too. In some cases the seller is short saling for only a little less than they owe- but in many cases we are buying these homes for less than half what the seller owes. It's ok at a retail store to ask a clerk to take an additional 10% off when you find a stain on a clearance shirt- they might actually do it. It just doesn't work that way with the bank. Offer fair market value for the home and I believe your experience will go along with less disappointment.
Another few things that I think we have going in our favor- the seller's realtor is a huge broker here in town. She has a full staff of people that handle short sales. Someone goes to the house every week to inspect it (a bonus in a town where vandalism of vacant properties is running rampant). She has a short sale negotiator on staff- this person helps the seller structure their sale before they ever list it so that they are more likely to obtain bank approval once they get to the bank's negotiator. They also contract a short sale processing company- a third party that does nothing but call the sellers bank once a week to follow up on the process. And finally- I have the world's best realtor. She has gotten her name on the e-mail distribution list from the short sale processing company so that she gets an auto-update every time they make a note in the file. If their note indicates that they are going to call and follow up on July 6th and she does not see the auto-update she then e-mails them and asks for status. I feel confident that we have lots of people on our side- and they are all doing their jobs when it comes to following up.
I have read lots of horror stories- Countrywide loses the paperwork. They reassign the negotiator five times. They close the case without notifying anyone. I am certain these things do happen. One post that I read suggested that you as a buyer contact the short sale department of Countrywide. Some posts even had names and e-mail addresses for managers at Countrywide. I did debate doing that myself but I have to tell you- it isn't wise.
First of all they aren't likely to respond. Second- unless your seller has specifically contacted Countrywide and notified them that you are allowed to discuss the sellers loan with them you aren't going to get anywhere. I had to separate myself from this transaction as a buyer and think of it from the perspective of the job that I do- I would never ever give out information on any loan in process to anyone other than my broker in the transaction. So if I had a desperate buyer calling me (no matter how sad their story or how educated they seemed) I still would not give them any information. So save your breath. Instead follow the appropriate "chain of command" and hire the best professionals you can find to work on your side. Start with the right buyers realtor. Ask plenty of questions about the short sale you are buying- what is their situation for the short sale? Have they lost a job? Moving out of state? Divorcing?
Not every seller's realtor is going to be as fluent in short sales as ours is. Not every city has as many short sales as we do- but ask your realtor to check with the sellers realtor. How many short sales have they handled? Who is helping the seller put their short sale package together to submit to the bank? Who will be following up on the short sale and when will they be following up? Weekly? Every other week?
And finally- prepare yourself for this process. Here is where I will sound like a hypocrite. I deal with short sales every single day in my line of work as a mortgage lender. I knew KNEW what I was getting into when I signed up for this and yet I still have anxiety about the time-lines. First of all- if you are on a deadline just don't bother with a short sale. If you know you need to move by a certain date- pass. Very few short sales are happening in less than 60 days- including those that may have already had previous bank approval and the previous buyer fell out of escrow.
We thought that we were immune to the stress of worrying about the time-line because we already do own a home and were in no hurry to move. However when we started worrying about how long it would take to rent our current home out we listed it on the MLS thinking it would sit there for 60 or 90 days with no offers and we would then have to decrease our rent to find a tenant. Little did we know- a rental property in the middle of the desert with a swimming pool is a VERY HOT commodity. We had four serious tenants in the first week. We should have just used that as an indicator that our home would rent quickly and then take it off the MLS but instead we decided to work with one of the tenants because they were willing to wait until September 1st to take occupancy. Hence the stress of us now having a time-line. If you are going to make the same mistake just know what you are getting yourself into.
Our next big mistake (which will hopefully turn out to not be such a mistake) is that we did go ahead and do an extended lock on our loan. We have financing approved for the new property and rates were on a total roller-coaster starting two days after our offer was accepted. At the time we wrote the offer we probably could have gotten 4.625% if the seller paid the discount of 2 points. Within a few days the rate went to 5.25% at the same cost of 2 points. I started freaking out (who, me?). So I watched the rates like a hawk and as soon as they dipped back down we locked at 4.875% at a cost of 2.375. Because we did an extended lock we had to pay .125% up front- which is also non-refundable even if the loan doesn't close. We have seen some offers to Countrywide in which the bank refuses to pay the closing costs on the short sale- so if that is the case then we will be responsible to buy down our own rate (should the loan close on time). So again, stress. Brought upon myself of course.
I'm just telling you- there have been some positives to my experience, but I have also created some of my own negatives. If you are thinking about or even already in the midst of buying a Countrywide short sale just know that it isn't all doom and gloom. Some people say they have been in the middle of it for a year and a half with no end in sight- and I'm not saying that isn't possible, but if that is the case it is likely for a very good reason. Maybe they didn't have their paperwork all together. Maybe they had one or more buyers that bailed- and incidentally, there is no "substituting" buyers on a short sale. If a seller goes into contract with Buyer A and that buyer decides they can't wait anymore but he has found Buyer B right at the finish line they will have to go back to Countrywide to renegotiate. Plan on at least 60-90 more days.
And just one last thing- if you can't handle stress like this, just pass. Your realtor and your loan officer will thank you.
****If you want to check in on current status of my short sale experience visit me at:
http://shortsale-longsale.blogspot.com/