AboutHeather Expertise I can offer information about pre-foreclosures, foreclosures, short sales and high rise projects in the Las Vegas area. I can also assist with financing questions, especially involving investors.
Experience I have been in the real estate industry since 1990, and 4 years in Las Vegas. I am also a licensed loan agent in Nevada.
Education/Credentials BA in Liberal Studies from CSU Northridge
Licensed Realtor
Expert: Heather Date: 7/15/2008 Subject: short sale chattel fee
Question Hi, we have two questions about short sale and chattel fee. We are buying a short sale house in central new jersey. We put an offer and the seller accepted it. We are waiting for the bank to approve now. The sellers give us a chattel agreement and ask us to pay them $25,000 for their furniture that we do not want. Our realtor told us that we can negotiate this with them. She also said even if we do not want any of their furnitures, this money will give the sellers motivation to move out. Otherwise, they could stay inside until foreclosure, which means that they could stay in for a year without selling the house. Can you please tell me if this is a normal practice in short sale? If so, what is the average chattel fee that buyers give to sellers? We really do not want any of their stuff. We like the house, although it is trashed by them. But with some work, it could go back to good condition. And we are willing to give them some moving expenses. But $25,000 seems too high.
Another question is about our mortgage. Our mortgage company says that since the bank has not approved the contract, they will hold our application until we hear from the sellers' bank. They do not want to do underwriting twice. Is that right? I heard that if we have a approved loan, it will be easier for the sellers' bank to approve our deal. If they do not start now, once the sellers' bank approves, we may not have enough time to close the contract. What is your opinion?
Thank you very much.
Answer Hi Leo -
OK first, a short sale is when the sellers owe more than the house is worth. In the case of a short sale, the sellers can not profit at all, zero, nada from the sale of the house. The point is the bank has to take a loss on the loan and they believe the sellers should share in the pain. That being said, the sellers can try to sell you their personal stuff (or chattel as you call it) but you're under no obligation to buy it.
My first question is "Is the seller in default or behind in the mortgage and has a lis pendens been filed?" As I understand it, in New Jersey, unless contested, once the Lis Pendens filed, the time frame is 90-120 days. And after the foreclosure, the seller has up to 6 months to try and redeem the property. However, once they don't own it (close of escrow or a foreclosure sale), they must move out. They can only move back in if they're able to redeem the property by coming up with the cash after the foreclosure (like by winning the lottery because who would give them a loan after foreclosure?). http://www.foreclosures.com/www/pages/state_laws2.asp?state=NJ
So, if you put an offer on the house in short sale, the seller accepts, you must wait for the bank to accept. If the bank accepts, then escrow proceeds. Although law requires for the owner to accept first (at least it does in Nevada), the bank is really the one driving the bus and the sellers don't have anything to say about it. If the bank accepts, then once everything in escrow is complete (inspections, loan approval, etc.), the seller has to move! They no longer own the house. I don't know how long it takes to evict someone in New Jersey, but once escrow closes and you own the house, you have the right to evict the sellers if they don't move out. As a precaution, contact a local eviction company in New Jersey to find out what the process is out how much time they have and what it costs (every state is different, but its usually they get served a 3-5 day notice to quit and if they don't get out, the sheriff shows up and gets them out.)
If you want to give the sellers some moving money because its something you choose to do, do it outside of escrow because you want to. Anything they leave behind in the property after the sale is yours. PERIOD. If the bank actually forecloses, some banks will give the sellers up to $1500 to move out and leave the property in reasonable condition (they call it cash for keys). I agree that $25000 is way too high. And I certainly wouldn't be bullied into buying things I didn't want by a real estate agent, seller, or anyone else. (By the way, was it the seller's realtor who told you they wouldn't move unless you paid them? If so, I'd make a call to their broker. That doesn't sound very ethical to me.)
OK, regarding your lender. Most lenders will give you preapproval for a certain amount and write a letter that is submitted with the offer showing you have ability to borrow the money to buy the house (this is usually after a credit check and they may collect other info from you). However, it sounds like they don't want to go through with the complete process which usually includes ordering an appraisal, etc. until they have an accepted offer. That is pretty common.
So I have two more questions for you. Are you using a realtor to represent you as the buyer in this deal? If not, why not? The lender will pay the commission and you get someone looking out for your interest. I recommend that each party should ALWAYS have their own realtor to represent their interest. If you're buying using the seller's realtor, they're looking out for the sellers, NOT for you and although they have to be honest, they don't have to be FAIR to you. It never saves you money when buying a house without a Realtor.
Secondly, are you borrowing directly from your bank or from a loan broker. Loan broker's can usually match the deal you get from your bank, or sometimes get you a better deal, and they will take care of all the details for you, getting the preapprovals, etc. If not, unless you have a personal relationship with the bank or whoever you're borrowing from, you're probably not getting the service you deserve.
In the bank's defense, most banks will at least let you know that you are prequalified to borrow X amount to buy a house and what it will probably cost you per month. The escrow process (which is after you have an accepted offer), is when everyone does their due diligence including inspections, appraisals, etc. The bank will give you enough time to complete everything prior to close of escrow.
Short sales are frustrating and can take a very long time just to get an approval or even a counter offer from the lender, as long as 3 months or more. If the lender knows they have a solid offer on a property, they will usually postpone the foreclosure sale allowing escrow to proceed. So if you put in an offer asking the lender to respond in 3 days, chances are they won't unless the short sale was preapproved. The lender will respond when they get down to your offer in the pile. If you said you'd close by August 15th but the bank doesn't respond until August 12th, write an addendum changing the close of escrow date. Very common and very acceptable because 3 days isn't enough time to complete the process or the due diligence.
The better your offer was and the more prepared the offer was with documentation supporting your offer (why is was low, condition of the property, proof of your loan approval, etc.) the better. A short sale also requires documentation from the seller. The seller has to provide lots of financial information to the lender in order for the lender to approve a short sale for them (tax returns, bank statements, pay stubs and a letter explaining why they can't pay - also known as a hardship letter). If all of this information isn't on file with the lender when an offer comes in or with the offer, it drags everything out. If the seller or the seller's agent has prepared the lender, the short sale usually goes much smoother and gets a faster response from the bank. If the seller or the seller's real estate agent hasn't done this, and the bank sees the file is incomplete lacking the documentation from the seller, it gets put on the "When we get around to this one..." pile.
Sorry to write such a book about it, but an inexperienced realtor who doesn't know how to do a short sale can make the process much worse. Decide how bad you want this house. If the bank hasn't accepted, and you get tired of waiting, you can always withdraw your offer (or if you put a date that they had to respond by and the bank didn't, you offer will automatically expire). I'd still send a cancellation to the lender if that's what you choose.
If you really like the property and are willing to wait it out, then get your patience out of the drawer because it will be needed time and time again.
I hope this helps and it works out the way you want it to.
Heather Peck
Rosen & Company
702-595-7380
LasVegasExpert@yahoo.com
