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Not All Short Sales Have Happy Endings

By
Real Estate Agent with Long and Foster Real Estate VA License # 0225089470

Not All Short Sales Have Happy Endings

Short Sales are something most real estate markets haven't been seeing much of the last two to three years.  Unfortunately, the suburbs of Northern Virginia have been a place where Short Sales, while fewer in number than during our market crash, still exist.

Just this year, 2016, I have listed five Short Sales.  Three of them went successfully to closing.  One was so easy I thought I was dreaming.  The other two were what I have become to know as typical for the Short Sale process. Banks needing more documentation.  Requesting the same thing you just sent them over and over.  They see it, validate it and call next week to ask for that very document again.  It can be maddening.  But that is why I keep copious notes.  Being able to document who you spoke to, what they said and when is the way you get a Short Sale file escalated.

The two that didn't get approved this year were real head scratchers.  The first one the bank declared that the out of state sellers made too much money.  They expected the sellers to pony up the short fall of the mortgage payoff.  Well, they live in another home out of state, and decided that wasn't their desire.  That home, sadly, is now in limbo.  It is still owned by the same folks who tried to sell, and it is vacant.  No doubt it is aging quickly and will be worth even less by the time the Short Sale Bank reclaims it through foreclosure.

Today's Short Sale denial, right in time to ruin the holiday spirit of all the parties involved, has so many reasons for denial that I can come to only one conclusion:  the investor on the loan is out of their mind.   The interest only loan has adjusted and is unaffordable to the sellers, who have moved on to another home.  Through the years, these sellers have tried every refinance option they could.  Because the value of the home had only recovered about 60% of it's value from the original sales price, no refinance was approved.  And today, the last best shot of getting the most for the home was rejected by the bank.  Merry Christmas, right?

While this is a set back for the buyer, and disappointing for my sellers, they will move on with their lives.  My sellers will meet with an attorney to find out how they can best protect themselves when the home inevitably goes to foreclosure, even though they currently have no assets.  In the meantime, the bank is hurting themselves the most.  That home will also sit empty, aging quickly and depreciating further in value.  

Short Sales are still the best option to try first when you have a financial hardship and can no longer afford your home and it isn't worth what you owe.  However, when you attempt one, it isn't a guarantee that your Short Sale will be approved.  I've helped so many Northern Virginia home owners successfully navigate Short Sales, but in the end, if the bank is unwilling or has rigid criteria that we just can't meet, that's when it is time to look at the other options.  Starting with an experienced agent is the best shot you have at approval, and while I can't get them all through, my successes far outweight my rejections.

Comments (29)

Sham Reddy CRS
Howard Hanna RE Services, Dayton, OH - Dayton, OH
CRS

Other agents don't get why I still do them.  Partly because I want to help people get out their challenges and still protect their credit.  Most banks prefer transferring the property to a third party than getting back into their REO portfolio where they are likely to lose more!!!

Dec 10, 2016 05:13 AM
Chris Ann Cleland

Sham Reddy --Same here.  I do it to help people.  And there is truly no more loyal referral base than a satisfied Short Sale seller who you saved from foreclosure.

Dec 11, 2016 08:54 AM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Chris Ann, I only lost one to foreclosure and the bank just would not negotiate with my negotiator even with a strong offer...I so dislike the whole short sale process and so disappointed for you and the clients...you did your best & it is amazing how many foreclosed homes I see in good suburban neighborhoods after 6 years still not marketed to sell...just uggh!

Dec 10, 2016 05:18 AM
Chris Ann Cleland

Ginny Gorman --We've got some in our neighborhood that are bank owned and vacant, just sitting there with no utilities.  They are creating way more long term issues with the properties that way.

Dec 11, 2016 08:54 AM
Shirley Coomer
Keller Williams Realty Sonoran Living - Phoenix, AZ
Realtor, Keller Williams Realty, Phoenix Az

Arizona worked through an amazing time of short sales and foreclosures.  Now our market is only about 5% distressed.  That said, I have buyers waiting on approval for a short sale, so there are a few still out there.  They have been coached that the lender may not approve the sale, or the seller may not qualify.  That said they are willing to wait for a great property, that with their renovation loan will give a great home. Those who list short sales are still providing a needed real estate service!  Good luck with yours!

Dec 10, 2016 05:24 AM
Chris Ann Cleland

Shirley Coomer --There aren't a large number of short sales here now, but being an agent that can navigate the process, with loads of experience, I get my unfair share of them.  I do not take sellers that I don't think will qualify.  That's just asking for trouble.  Yet, I'm finding the banks are getting more stingy with their approvals.

Dec 11, 2016 08:59 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Chris Ann Cleland ,

What a bummer..the bank is very short sighted in not approving  your sellers contract. I've never understood the managment of the banks when it comes to short sales and why they don't want it off their books and move on! I had an old client who lost his job and was behind in his payments for over a year and a half ! I asked him why he didn't call and tell me..he was embarrassed and just ignored the letters and phone calls and found solace in the bottle. Most emotional transaction I think I've encountered. I did get his home closed and he got some money enough for a treatment center.

Dec 10, 2016 05:37 AM
Chris Ann Cleland

Dorie Dillard --These are always very emotionally charged transactions.  Glad your seller got some financial help from the bank.

Dec 11, 2016 09:01 AM
Liz and Bill Spear
Transaction Alliance 513.520.5305 www.LizTour.com - Mason, OH
Transaction Alliance Cincinnati & Dayton suburbs

Chris Ann, Fortunately short sales are very uncommon in our market, but like yours, they still exist.  We finished up a short sale this year with two liens.  Trying to get the 2nd bank to an acceptable amount was challenging, and getting the two approval windows to align between the two banks and what the buyer's lender could do was a real pain.  All told, about a year from initial contract to closing.  Fortunately the buyers had special motivation to stick with it so ultimately we got it done for our sellers.  Bill

Dec 10, 2016 05:42 AM
Chris Ann Cleland

Liz and Bill Spear --The longest one I ever had to deal was eighteen months and it went through three buyers.  At the end, the bank didn't want to pay the bank HOA fees.  I was so hardcore about it in about a thirty second diatribe that the negotiator was backed down and the HOA fees were paid.

Dec 11, 2016 09:04 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Good morning, Chris Ann... no doubt those short sales are not an easy cross to bear. I hadn't seen one myself in years, but am about to list one early in the new year... not normally something I do, but this was a referral from a special former client and we've got a top short sale attorney in NC and SC handling that side of the transaction... so I just need to market the you know what out of the property.

Dec 10, 2016 05:42 AM
Chris Ann Cleland

Nina Hollander --It's great that you have that partner that handles the Short Sale negotiations.

Dec 11, 2016 09:05 AM
Dianne Goode
Raleigh Cary Realty - Raleigh, NC
Realtor/Broker

Hey Chris Ann.  Short Sales are fraught.  I tell my buyers that Foreclosures are relatively straightforward and usually close, but a Short Sale may keep you in limbo for months and then not happen.  I had one this year that fell apart -- went u/c with another buyer -- who couldn't get the loan to work -- and they came back to us.   If your life needs more drama, just try to buy a Short Sale.

Dec 10, 2016 06:20 AM
Chris Ann Cleland

Dianne Goode --In most cases, I blame failed Short Sales on the Listing Agents not properly qualifying their sellers.  If they have funds, are uncooperative and their payments haven't changed, nor has their employement, it is all a recipe for disaster.  We also have some agents in our market that believe that Short Sales will sell for dramatically less than list price.  Not the case at all.  Banks want market value.  


We can help buyers avoid the under priced short sales that re going nowhere.  And when I am about to show a short sale, I always look up the agent's experience on the matter.  If they have a bad history with them, or none, I will advise my buyers accordingly.

Dec 11, 2016 09:11 AM
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Chris Ann. I never had a successful short sale. I admire your skill and tenacity.

Dec 10, 2016 06:55 AM
Chris Ann Cleland

Sheila Anderson --I've had too many to count at this point that have closed.  

Dec 11, 2016 09:12 AM
Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

You are so true, that not all short sales come to completion, but we still try because there are still a lot of homeowners that need our help

Dec 10, 2016 09:05 AM
Chris Ann Cleland

Ed Silva --If they have a hardship, I'm there to help.  If they have the money to get out of the home, and just want a do over, it's one I'll walk away from.  


Will never forget the listing appointment I went on in a very pricey property.  I was served wine and cheese in the parlor and big band music played throughout the house.  The sellers were adorned in designer outfits that probably cost ten times the cost of my outfit.  


When we went over their income and assets and their situation.  They just wanted out of the house because it wasn't worth what they had paid.   They didn't want their assets at risk to make up the difference in value.   That's not a hardship and I informed them of that.  

Dec 11, 2016 09:24 AM
Lyn Sims
Schaumburg, IL
Real Estate Broker Retired

Ahh have been there. I was hoping that with all the years past they would be coming to their senses. The investor is the 'outside crazy guy' in all the transactions. It's like turning the file over to the guy running the asylum.

Dec 10, 2016 10:22 AM
Chris Ann Cleland

Lyn Sims --Sometimes it does feel that way.

Dec 11, 2016 09:36 AM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

Sadly, many issues of the short sale hits the home owners after the sale with higher interest rates and more because of what has happened to their credit.

Dec 10, 2016 02:01 PM
Chris Ann Cleland

William Feela --Very true.

Dec 11, 2016 09:37 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

We still have a fair amount of short sales and foreclosures here. Sometimes the banks decisions make no sense.

Dec 10, 2016 03:57 PM
Chris Ann Cleland

Kat Palmiotti --And those are the situations that make you feel like you are banging your head against the wall.

Dec 11, 2016 09:38 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

Chris Ann,  I have had a few short sales rejected for real dumb ass reasons. It forces the borrowers who are acting in good faith and doing the right thing - into foreclosure.  Shameful really.  The banks are not hurting ... and they don't care. 

Dec 10, 2016 04:57 PM
Chris Ann Cleland

Kathleen Daniels --And I've had banks do shameful things to jack up their own profit on them, like auctions.   The buyer's premium goes straight to the loan servicer.  One of the approved ones this year had a full price contract and the servicer made my sellers participate in an auction where the same buyer got the home for $50K less.  Meanwhile, the servicer made about $25K on the buyer's premium.  Disgusting behavior.

Dec 11, 2016 09:40 AM
Jerry Murphy, CRS, SRES
Long Realty West Valley - Anthem, AZ
Anthem, Phoenix, and Scottsdale AZ Real Estate

Thankfully it's been about 4 years now since I did my last short sale Chris.  And I am sooooooooooo glad.  I processed about 75 of them from the years 2007 through 2012.  Each one was different, and each one had it's own challenges.  It sounds like the process has at least gotten a little better.  Best wishes. 

Dec 10, 2016 05:11 PM
Chris Ann Cleland

Jerry Murphy, CRS --I actually think we are seein it get worse again.  When Short Sales were something seen very commonly, the banks were more likely to work with the sellers.  Now, they are back to skeleton crews and some have completely unreasonable demands.

Dec 11, 2016 09:42 AM
John Meussner
Mortgages in AZ, CA, CO, DE, FL, GA, IN, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI - Fair Oaks, CA
#MortgageMadeEasy Fair Oaks, CA 484-680-4852

Many banks & investors do a poor job in maximizing their return in the case of a short sale -- it's sad that the seller is harmed when the bank ends up really just hurting themselves.

Dec 11, 2016 02:34 PM
Chris Ann Cleland

John Meussner --It is a shame, but it was worth trying.

Dec 11, 2016 07:57 PM
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

The one thing i have learned is that once the seller moves out they loose a lot of negotiating power. If they  buy another home and vacate the old one. The banks are all wanting money. I also see a non caring attitude as it is not their money Chris Ann Cleland , it is not right and something common

Dec 11, 2016 03:23 PM
Chris Ann Cleland

Scott Godzyk --These sellers don't qualify to buy anything else.  One moved out into a rental.  They are done with the home.

Dec 11, 2016 07:57 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Chris Ann

Some of these stories just have you scratching your head...but that's been true of short sales for years now. It's a shame you and the sellers, and buyers, have to go through so much only to have someone make some decision that doesn't make a whole lot of sense when everything could be resolved and sellers, buyers, and bank could jsut move on!

Jeff

Dec 11, 2016 05:01 PM
Chris Ann Cleland

Jeff Dowler --I'm used to banks at least countering an offer.  Not out right rejecting it for every reason under the sun.

Dec 11, 2016 07:58 PM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Chris Ann first I am sorry to hear about the fact that Short sales still exist... someone needs to tell Case Schiller they are again not "spot on" and I am being kind, do not want to rant or swear on the WW Web... two weeks ago they officially declared that the Real Estate Market is back to pre-economic melt down.. maybe they need to read your post...Endre

Dec 13, 2016 11:13 PM
Chris Ann Cleland

Endre Barath, Jr. --Yeah, not yet.  Values in our area are up, but not where they had been at their peak before the crash.  I call B.S. on that information.

Dec 14, 2016 04:00 PM
Curtis Van Carter
Better Homes & Gardens Wine Country Group - Yountville, CA
Your Napa Valley Broker Extraordinaire

Chris Ann

You would think these lenders have learned it is best to sell these properties after the many years we all endured this. Still a bit surprised 2 of the 5 still haven't. Glad you got the other 3 closed and one was so easy. Cheers cvc

Dec 14, 2016 08:45 AM
Chris Ann Cleland

Curtis Van Carter --I was surprised at the two that got rejected as well.  Perhaps they are reading the Case  Schiller info and think there should be no more need for Short Sales.

Dec 14, 2016 04:01 PM
Lynn B. Friedman CRS Atlanta, GA 404-617-6375
Atlanta Homes ODAT Realty - Love our Great City - Love our Clients! Buckhead - Midtown - Westside - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

Chris Ann Cleland 
Thanks for sharing the full stories with us.
You are skilled and the Owners were lucky to work with you.
All the best - Lynn

Mar 19, 2017 08:12 PM