A Short Sale Hud Headache

I have a home that I am doing as Short Sale on. The home has been on the market for 2+ years with 3 other realtors. My sellers could not wait any longer, they had to leave. The home was in an area that the seller felt had a raising crime rate, tons foreclosures and boarded up homes. My Seller just did not feel comfortable with what was happening in the area so he purchased another home for him, his son and pregnant wife.

Well we got an offer on his past house and all was going well. Chase, the 2^nd loan was very willing to do a short sale. The first loan was with La Salle, when we got the offer and then later was purchased by Bank of America. La Salle was very easy to work with but Bank of America denied us because it was a FHA loan, HUD's guidelines state if the borrower buys another home in the area then he shall be denied for a short sale.

I was super surprised about that. I told the mitigation rep that the offer I had was above the BPO price. I also told him that their was no way Bank Of America could sell this home for what we had in hand. I explained that it took us 3 years to get this offer and that winter was coming and that if we did not sell soon, we would have a hard time selling when we have a foot of snow outside.

Well, they just said no. They said that BOA works with HUD and this was HUD's guidelines.

The only thing I can think of is to wait for Sheriff Sale and see if I can negotiation with the REO dept during redemption. Any other ideas?

Mike Sher

Posted by Mike Sher on 09/09/2008 05:10 PM

Comments (18)

shortsale, short sale, shortsales, short sales, hud, fha, foreclosure, redemption, foreclosures

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18 Comments on A Short Sale Hud Headache

SEP

2008

This is the first I have heard of this guideline. Thanks for the heads up Mike.

Mike,

I have had nothing but strange things happen in this mess. I had an above BPO offer with a buyer with 20% down, after three months of trying to get Litton to move on the offer the home foreclosed. A week after foreclosure the lender called and wanted to know if I still had the Buyer, I just laughed at them.

The home was marketed as an REO and has been in escrow for over 6 weeks for $40k less than we sold it for.

Go figure.

Take care!

RJH

RJH, that is heartbreaking. I feel that the rotten apples have taken over the whole darn barrel.

Mike

Mike,

Thanks for the post. Yes it is incredible to think that these lenders could ignore the facts. I had a short sale listed at $439,900 where Optimum had the first at $530,000 and GMAC had the second at $135,000. I got a cash offer of $440,000. Optimum accepted and GMAC declined because they wanted $9,000 more than the $1,000 offered by Optimum. This was October 2007 and now nearly a year later, the property is listed at $529,900 with no takers. Do you think Optimum should have paid GMAC $10,000? Was Optimum's decision wise in light of the information they had at their disposal? What would their stock holders say about their decision making process? At this rate lenders will continue to lose huge sums of money.

Thanks for the advice

I am so surprised at this guideline. BOA is terrible to work with. I was working with a seller on a short sale with BOA. It was the worst experience to deal with them. The property eventually went to the sheriff sale after no offers were accepted by them. Great post.

WoW! I too have never heard of that. What happened to common sense?

It would have been good to have known that up front, but don't know how that could have happened, but then again, if BOA had told you this early on, it might not have been a problem.

Mike, I had the exact thing happen on a short sale with HSBC as my Seller wasn't living in the home and it was a FHA loan that also had to follow these HUD guidelines. I explained to them for various reasons why the Seller couldn't stay in the home and HSBC submitted it for review and it was authorized to move forward. It sounds like BOA needs some convincing that all is not simply so black and white. I'd ask them to go ahead and submit for the HUD guidelines to be reviewed for the obvious reasons that you indicated. I'm sure you'd get an exception. Good luck!

lynn, thank you for the comments. I will call boa wednesday and try again. I let you know how it goes.

SEP

2008

Mike... I'm learning more and more to dislike Bank of America... I'm about to jump ship with them for all my banking.

SEP

2008

roland, these short sales are really bring out the worst out of banks. I agree that boa is not handling this as well as I would like.

OCT

2008

I've completed a bunch of short sales for real estate investors. HUD has stricter short sale guidelines in place than those implemented under conventional loans. In my experiences, I have yet to find an FHA Mitigator that would make an exception. You said in your blog you'd still like to pursue the property at the public foreclosure sale. You can also wait when the lender takes the property back and includes it in his REO line up. You can contact the lender's assigned REO Agent to find out what the purchase price is and uncover any other terms. You could also visit the lender's REO website to see if the property is listed and for how much.

Tracy,

Thank you for the Post. My seller has moved back in to the home and we are trying again to get the short sale accepted. I will let you know how we do.

Mike

Is there no end to the ridiculously blase attitudes of these banks?

Looks like the answer to that is NO...

DEC

2008

Mike,

So do your people still own the other home they bought? I was a bit confused that you said they were able to move back into the home and are renegotiating. I do understand the theory behind the banks not allowing sellers to buy another home. If this weren't the case, you would have everyone and their dog applying for short sales. People being transferred who have no equity, people who are having a tough time making their payments but aren't genuinely in need of a short sale, or people who just made a bad buy. If there weren't any guidelines to keep people in these situations from taking the easy way out, homeowners would be called banks or automakers. I feel like that is one of the only smart things a bank does during a short sale. Too bad your folks sound like some of the ones truly in need.

The good thing is that your clients did buy another home and will not have to worry about a foreclosure on their credit report keeping them from buying another home. If it does end up going to the Trustee's sale, I don't see the benefit in negotiating to redeem. Here in Texas, you would have to pay 25% on top of what it sold for and who would want to do that in the area you described? One thing they may be entitled to is excess proceeds if it goes to sale. Hopefully, it won't get to that point but something to check on in case it does. Good luck.

Dustin Inderman - Austin, TX(ERA Millennium Realty)

DEC

2008

Hi Mike, I see you are quite active on the short sale madness, and I simply wanted to offer solution for you; as this will help you grow your business to work smarter not harder.

I represent a company who negotaiates short slaes for all realtors and we can do this in any state. I currently have 6 active deals in to the title/escrow companies now, and I must admit, the process is very simplistic for both Realtors and myself.

I know as an agent you cannot like to negotiate the short sale, who would? If I can help you out in anyway shape or form, I would be delighted to do so.

O'yah one last thing, I also have a $100.00 down HUD program for new buyers who do not have any money to put down outside of the $100.00. I have a power point presentation on this if you are intersted? You can emal me for more info at your desire.

Happy Holidays Mike,

FEB

2009

OK-kinda similar situation...have client who have moved out of home they stopped paying in Oct. 08, home prices are falling, they have an FHA loan, now owe more than home is worth...their bank tuned down the shortsale paperwork stating they did not live in the house...I have told them get a superviser on the phone from the bank and to also call HUD, can HUD make a judgement call if their is a offer on the table and my sellers dont have any other money to bring to closing to deliver clear title? Meaning, can HUD demand that the bank that gave the FHA loan in the 1st place make them do a short sale?

Help

Melissa

mjpolce@kw.com

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Mike Sher

Bloomfield Hills, MI

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