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Loan Modifications from the lender - just before short sale approval

How many of your sellers have gotten unsolcited loan modfication approvals. Mine have.

Other Realtors have told me the same thing has a happened to their clients.

After you get a negotiator assigned you may wish to prepare your clients.

Unexpected approvals may be coming to derail your short sale.

I am not against loan mods, in fact they are part of a useful workout plan.

But a surprise one can be a problem.

Sellers should have in mind what would be acceptable.

What kind of payment reduction. 2 years 5 years 30 years 40 years?

How much

Do they want the missed payments tacked on the back end?

Principle reduction?

Have they left an escape clause in the purchase and sale agreement?

Posted by San Diego Short Sales, Orange County Short Sales on 12/16/2008 05:41 PM

Comments (6)

loan modification, short sales, negotiations

This post has been included in California Information

6 Comments on Loan Modifications from the lender - just before short sale approval

DEC

And many times in the middle of our short sale the lender is saying they can loan mod but have to stop the short sale, then they get turned down for the loan mod and we are back at the starting gate again.

DEC

Wow - that might rise to the level of an unfair business practice in California.

thanks for the update.

MAR

Hi - We (buyer) were supposed to receive a response last week from Countrywide on our short sale. At the end of the day when I contacted our broker, she informed us that both her and the Seller's agent did not know the seller contacted Countrywide to try and loan modify. Supposedly, after realizing that he would not be able to, the file has been sent back to Short Sale. They now tell me that it will take another week again. How can we find out that our file is really back in the Short Sale deparment?

Now that the seller realizes that he cannot afford to keep the house, our concern is that he will now take other offers and sign them. Our understanding is that due to the fact that he is still the owner and this is not a foreclosure property, he is not obligated to sign any other offer. Is that true?

It would be fantastic if you could write on the process if a seller is trying to loan modify but at the same time has an offer in the short sale department.

Thanks for your info.

Thanks John - We will keep your info in we need an attorney. Hopefully not. One other quick question, do you think it would be appropriate to ask them for an exclusive as we have requested a meeting tomorrow, until we hear from from Countrywide. We can also prove to them with our bank statements that we have more than is needed for our downpayment as well as our credit scores being over 800? Thanks again.

MAR

This answer is now out of order because I corrected some typos and deleted the previous answer.

1. The easy way to find out the status is to have the seller's short sale negotiator set you up on a conference call while the negotiator speaks with countrywide. The other way is to trust the seller's agent is telling you the truth.

2. The other answers to your questions involve contract law. The standard California of Association of Realtors forms set up a process which can be very one sided in favor of the the seller and the Realtors.

I would argue that when filled out properly by the seller, the typical purchase and sale conract with the CAR short sale addendum, creates an illusory contract. The buyer may have no contract at all, until the seller gives the buyer a written notice of approval.

If I am the buyers agent and I am making a strong offer, I would demand a much stronger contract than the one set up with the CAR forms. (MLS rules will also effect our rights)

At a minimum I would consider negotiating for the following terms:

1. A written agreement stating your offer will be the only offer presented to the the lender until approval or rejection.

2. Reservation of your right to counter or improve offer before other buyers can make offer.

3. Placement of the listing in pending.

Depending a specific buyers needs I might consider a few other changes to the CAR forms.

Thank you for the question. You got me thinking.

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