This is an autopsy of a recent short sale we completed and lessons learned.
The client was a referral from another agent. My colistor and I have positioned our selves as short sale specialist. Track record to date, 40 closed, 44 Active Listings.
A natural progression of all this is a lot of referrals and a real estate business that is keeping us busier then a one legged man in a okole(Hawaiian for butt) kicking contest.
This client had hired an Attorney to do the loss mitigation. Mistake number one. We did not get an authorization to be able to check directly with the bank. Our request for updates where slow at best and we really never knew what was going on with the file. We where not the Attorney's client so we where treated like beggars at the ball when requesting updates.
As we got closer to the date of on the lender's written approval. The one that states you need to close on or before, not the day after. The buyer's lender kept saying the loan docs are coming, the loan docs are coming. Like Paul Revere yelling "The British are coming about a week before the British actually came. So the long docs come the day after the lenders written approval expires and escrow does not close.
What happens next? Buyer's agent is little stressed. Buyers are stressed. Buyer's Parent is a Realtor who thinks based on her/his limited information and experience with short sales; it will move things along if she/he called us and threatened us with litigation.
Loan locs are getting ready to expire. We find out that the "Verbal" arrangement that the 1st would freeze the payoff amount until we closed was out there with the Sasquatch. Heard a lot about but never verified. Mistake number two. Same as mistake one, relying on a third party to do loss mitigation. We are thousands of dollars short, and the 1st either needs to short or we get a reduction in payoff to the 2nd. 1st refused to budge on anything less then a full payoff. 2nd agreed to a reduction in payoff the morning the 2nd lock was ready to expire.
State budget deficits have caused policy changes at the Bureau of Conveyance where title is recorded and the Friday of that week we trying to close is a holiday leaving us only 4 weekdays to work with. A policy change was, that a transaction needs to be funded at minimum two days before recording. This policy change was enacted the Monday of the week we are trying to close.
When we do get the new approval there is large deficiency request that was not on the original approval. Seller will not sign. We scramble to get that removed. We get that removed and new approval does not state that a cash contribution will be needed from the seller as was originally negotiated. Seller is not willing to wire funds so we can close escrow. The transaction is already funded and escrow is freaking out because we are short. Executive decision - commissionectomy to get the deal closed. Settle with the seller latter on making up our lost commission.
Our team jumped in at the last minute to get the re-approval from the lender to make the deal happen. I personally got up at 3:30A.M. to start calling the lender two days in a row to make it happen. 3 hours of sleep in a 48 hour period. In the end we made what amounts to .075% commission. Lesson learned. We will never let a client use a third party to do the loss mitigation even if they have law degree. This whole transaction was a FUBAR situation from the beginning. In the end the deal is closed and there is no recourse for any parties to seek future litigation against us. Sometimes you need to cut a leg off to save the body.
Before taking on short sale, ask your self, are you willing to take a commissionectomy to close the deal?
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