May 14, 2012

Tip 19-2012: Insane Short Sale Story

Charlottesville Real Estate Attorney

Tip 19-2012:  Insane Short Sale Story 

We all know that short sale lenders are overwhelmed, and take too long to review and hopefully approve a short sale.  But what happens when the short sale negotiator simply screws up and drops the ball?  You will not believe this story:
The short sale contract was $164,000 with no contingencies.  The lender's BPO was $162,500.  The outstanding first mortgage was $176,000, with a second at $43,000.  The second wanted $6,000 and the first only offered $2,600.  To satisfy everyone, all parties, including the realtors, agreed to contribute an extra $3,400 towards the second lender's requirements.  It should have been very simple to get an approval.

Unfortunately, that did not happen.  The short sale negotiator for the first lender, after many, many lender mistakes throughout the process would not postpone the foreclosure.  She actually stated that, "the foreclosure would be better for the Borrower.". 
Guess what happened at the foreclosure sale?  The bank only bid $126,500 and the property was sold to an independent third party for a dollar more.  The second lender got nothing.  Now the Borrower has an approximately $50,000 deficiency with the first, and a $43,000 deficiency with the second.

The first only received a net of approximately $122,000 instead of the approximately $145,000 if they had accepted the short sale contract.  The only person who won was the successful bidder at the foreclosure who ultimately sold the property for a $40,000 profit!!

This story is not uncommon.  Short sale lenders need to have someone of last resort who can override a negotiator's "insane" actions and decisions.  Where are the grownups?

Contact me at 434-951-0858 or if you have questions.  Thank you for allowing us to send you this email.    

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William D. Tucker, III 
Charlottesville 434-973-7474 | Lake Monticello 434-589-3636  

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