My first reaction was joy. Then I got pissed off. I waited 9 months for the bank, and now i get 30 days to close escrow or have to pay them? Well I did manage to close escrow in 30 days and I am so happy that i finally got the house.

i spent 9 months trying to get inside the mind of the bank, analyzing why they do the things they do, wondering why they didn’t want to hurry up, etc

In the end, it hit me. There is no strategy. These banks are totally clueless and we give them way too much credit by thinking they have some master plan. i bought the house for 60% of the loan amount the short sellers had on the house. in other words, the sellers just stole/swindled/?? almost one million dollars from the bank.

Moral, be picky, fall in love with a house and stick with it. Just get a good price though.

Answers appear after your question:

“I have a signed contract from the seller and myself and the selling bank cashed my deposit into their escroll account. Does this really mean anything for me yet?”
No.

“It was explained to me that no other offers can be accepted now so I began to get excited. However, the bank can still decline this offer even though I offered the seller’s asking price?”
Yes.

“I don’t understand why the bank wouldn’t already be in the loop on this and advise the seller that if they list it for a certain price and it sells then they’ll approve the short sale.”
Well, some banks may do this but many wait until the offer comes in. Then the bank will order their own mini-review appraisal called a Broker Price Opinion to try and get a neutral opinion as to the value of the home. The bank has a duty to its shareholders to get the highest price possible, in order to minimize losses.

“The whole process seems backwards to me. Is the bank going to say no and have the property go back on the market for the same price that I offered?”

Well, how close to foreclosure are we here? If the homeowner is still making their payments, the bank can wait around for a better offer if they think the home should sell for more. Why would the bank rush to take your offer when they can delay reporting the loss on this house for another reporting quarter?

“The price already dropped 4 times (25%) and had been on the market for 4 months. Why is the seller even going thru this if they don’t have something already worked out with their lender?”

I don’t know the seller’s motivation. It could be many things. Maybe they are trying to stay in the home as long as possible before having to move out. Maybe this short sale is what they’ve worked out or hoping to work out with the lender. The seller probably would not be going through this if he/she did not have to.

Thanks for stopping by RCG.

Here’s a few additional details about my situation. The area that I’m looking in is in Connecticut in a fairly upscale area. I am very new to the whole process and to real estate in general but from all that I’ve reseached, the northeast and especially the area that I’m looking in has not been impacted to the extent that a lot of the areas that people have been posting about on the message board (arizona, florida, california). I just doubt that the listing agent has “extensive” experience with short sales just due to where their office is. My agent also mentioned that the bank that we’re dealing with is small bank that she’s never heard of – hopefully that’s a good thing.

I’m hoping that the combination of small bank and less short sales in the area may be good for me. I’m just keeping my fingers crossed!

I’ll keep on posting as this develops more.

Also, lets not forget that if our friends Fannie or Freddie are involved then they get their say too. And we know how fast our government responds.

At the end of the day though, the banks can’t waste resources researching a price on a home for which an offer may never come on. Plus, again, what they’ll approve today may be different than what they would approve 2 months from now depending on market conditions in your area.

My experience has been this. If the listing agent on the home is experienced in short sales, it makes a huge difference. Most of the agents that are inexperienced in this area drop the ball long before the offer ever comes in. For instance, if this home is the nicest one on the block and list price is 50% lower than anything sold for in the area within the last couple months, probably not going to get an approval. If the seller has yet to assemble their required documentation and you have to wait around after the offer or peicemill it together over a few weeks, that takes longer and tends to have the file “lost” on the bank’s end. I could go on for a while.

We hear your frustration and their have been calls from everywhere to standardize the process for everyone to handle these the same way. I’d love to see that happen but it most likely will not.

1. I have a signed contract from the seller and myself and the selling bank cashed my deposit into their escroll account. Does this really mean anything for me yet? It was explained to me that no other offers can be accepted now so I began to get excited. However, the bank can still decline this offer even though I offered the seller’s asking price? I don’t understand why the bank wouldn’t already be in the loop on this and advise the seller that if they list it for a certain price and it sells then they’ll approve the short sale. The whole process seems backwards to me. Is the bank going to say no and have the property go back on the market for the same price that I offered? The price already dropped 4 times (25%) and had been on the market for 4 months. Why is the seller even going thru this if they don’t have something already worked out with their lender?

2. This whole article and comments seems to be very negative on the short sale process (the truth hurts) but I didn’t see any data on how many of these actually go thru. The article seemed like there’s basically a 0% chance for it to happen.

Thank you for any comments.

At any rate, I agree with most of what you said, except that it seems your perception of where the frustration comes from is a little misplaced. The length of time it takes isn’t usually the problem. It’s the length of time it takes for them to begin working on it thats the problem. MOST of the time, files sit for months before they even process them. When you call for status reports you get 4 different answers from 2 different people.

Fancy this. If you are in a declining market, as most of us are, and a buyer makes an offer of $200,000 on a home that is realisticly worth $220,000, (everyone wants a deal, right?) and the offer takes six months to get a final approval it may only be worth $190,000 by then so it won’t even appraise. The bank is approving this price based on old information in the BPO because the BPO is 4 or 5 months old in some cases and they will NOT look at any updated information. “House next door sold for $20,000 less last month and it’s 1000 sqft bigger? Nope, don’t want to hear it. Home sat vacant and was vandalized and the AC stolen since the offer was made? Don’t want to hear it, that shouldn’t affect the value.” And let’s not start with all the comps that appraisers and BPO agents get sent back and rejected by the bank because they don’t like them because they’re too low or good forbid, they were REO’s or short sales themselves so they don’t want to see them.

Actual scenario: My client had a home that we had listed at the short sale price of $99,000. A buyer submitted an offer in June last year of $94,900. The bank supposedly did their due diligence and came back with a counter offer of $118,000 and change. I explained that it took a price of $99k and a period of 4 months at that price to get an offer of $94,900 and that 2 other LARGER homes, ON THE SAME STREET were listed lower than $118k and were having no luck. No matter. The bank foreclosed in December. The home resold on the REO market in May of this year for $64,545.

Who won? Everyone lost. The bank lost even more money than they had to, plus foreclosure expense, plus holding costs, plus about $10,000 worth of updating and repairs they did in preparation for the REO sale. The homeowner has a foreclosure on his credit and a single mom of 2 lost a house she really wanted and could legitimately afford in a location she wanted to be in. Not to mention, I lost a sale that made sense to everyone but the bank. But like you said, no problem, the tax payers will pick up the additional loss on that. We are losing money right now, but we’re losing sooooo much more than we have to on a regular basis.

Until there are some standards that this process is held to, and until the process becomes more proactive, we are not going to see this situation go away.

On one last note as far as current mortgage holders go, most are still being told that the bank will not modify or mitigate a short sale because they are not behind in their payments by 90 days. They are pretty much telling them that they have no hope of getting any relief unless they stop making payments. Where is the logic in that from a profit/loss perspective?

Honestly, I wouldn’t mind the wait if it wasn’t for the “10 days” and “72 hours” comments. I am at the point I want to walk away (I could after July 15 per contract) but it’s so close and yet so far. We’re told that what’s holding it up in underwriting is the fact the offer is low compared to the BPOs. So why don’t they just decline then, if it’s so low? Or is the fact that they’re taking so long to consider it a good sign? I’ve asked these questions every day to keep myself sane. I understand that the banks don’t consider the buyer. It’s a number to them, not a person. But if it’s a formula they use to make their determinations, then we either fall into that number or not.

Or maybe we’re on the cusp. Walking away is an option and we could just stay where we are. While we could get back the 2500 we put down as earnest money, we’d still be out about 1200 for the inspection and attorney. I just wish we’d get an answer.

Contact your state’s Bar Association and ask for a referral to an attorney who specializes in short sales. If you do not have money to hire an attorney (even if just for a few hours) ask your state bar association for a referral to free legal aid.

HUD-Approved Housing Counselors can also help you find a new place for you and your children.

I am very hopeful for you at this point. It sounds like your lender/servicer is working with a company that specializes in processing short sales. This is GOOD NEWS because it sounds like the process will speed up from this point.

Many short sale homeowners express frustration at having to wait so long. I know it’s hard. You’re almost done!