Expert: Lisa Webber - 6/16/2010

Question
QUESTION: I purchasing a house in short sale.  There are two lien holders and after 90 days of waiting the first one came back with a verbal approval.  The second lien holder has now requested a BPO but the listing agent cannot give us any concrete signs that the short sale will be approve but are asking for an extension.  What can I do as buyer to find out whetter the short sale will be approved.  I am working with an agent but the listing agent has not be as communicative and is working with a third party 'negotiator.'  What are the questions my agent should ask.  I would appreciate any advise before we decide to give an extension.  We need to move by August and right now we feel we are in the dark.

Thank you for any advise you can provide!!!

ANSWER: Short sales are very complicated and don't always close.  The second lien holder is most likely pretty much all unsecured, if the house was purchased on an 80/20 in the last several years because house values have dropped so much.  The second holds about 20% of the loan.  The second is basically going to be paid off to drop their interest in the house so the first has to give up some of the sales proceeds to the second.  This can vary, typically anywhere from $3-$7k as a payoff so the second will sign off to transfer the deed.  If the house forecloses, the first gets all the proceeds.  It does not make any sense that the BPO is ordered by the second lien holder.  What normally happens is the paperwork goes in and the first thing the bank (first lien holder) does is to order the BPO. That will be in within the first couple weeks and they base their negotiating off a percentage of the BPO.  How did the first agree to the short sale without a BPO?  That would be my first question.  Find out which bank they are working with also.  The listing agent should be calling the bank every week to get a status update.  They may be using a third party to work with the bank, which may be the negotiator, however there is also a "negotiator" that they could be working through at the bank.  Basically what happens is the bank assigns a negotiator who handles the file.  That is the person the listing agent should be communicating with or at the very least, calling the 800# every week and talking with a rep.  If the negotiator won't talk with them (happens at some banks) then the rep can update the agent because everything is kept in one place, what has happened, what is happening next, what they need from you.  If the listing agent doesn't keep on top of the bank and call each week, the file could get set aside.  There are so many short sales going on, you want to make sure yours doesn't get forgotten.  The bank negotiator is the one who gathers all of the information and then presents the package to the investors who approve or disapprove it.  At that point there can be more negotiating and usually is.  They may cut back closing help, change the commission rate for the agents, or want to up the price.  Not being involved in the transaction makes it very difficult to know for sure what is going on.  I've had short sales get approved in as quickly as 60 days and had one take 11 months from contract submission to closing (Bank of America nightmare).  A lot depends upon the bank and then the listing agent to stay on top of the process.  The tough part is when you have to move by a certain time and don't have a contingency plan.  If you have approval in writing, it will close so you'll be good at that point. I hope some of this makes sense.  If you have any additional clarification, we can continue to discuss the situation and see if there is anything else that can be done. The worst part of a short sale is the buyer usually is pretty much kept in the dark and is very frustrated.  The rewards can be good though, as many times the patient buyer can get a great deal!

---------- FOLLOW-UP ----------

QUESTION: Thank you for your response.  I believed the first bank ordered the BPO and came up with the payoff amount but now the second lien ordered a BPO.  Is there anything that WE buyers or my buyer agent do to get more informed where we stand?  Any idea if we can ask the listing agent how much wil the banks need to reduce to proceed?  Thanks again.  I will be sure to rate your response.  It was very helpful.

Answer
It's unusual for the second lien holder to have ordered an additional BPO.  The listing agent won't be able to tell you the exact numbers until they have feedback from the second lien holder.  If the second comes back and wants let's say $7k and the first doesn't want to give it up, they may come back and try to raise the offer price by $7k. It's especially frustrating because the bank negotiator and/or reps won't disclose the BPO amount so you don't even know what numbers they are trying to hit.  They will have a minimum allowable amount or "net" that they require based on their closing costs, the commission, etc., compared with the BPO amount.  There really isn't anything you or your buyers agent can do at this point other than call the listing agent every single week without fail and ask them to call the bank and get an update.  Each week you should be able to get some sort of update but your agent may have to stay on the listing agent to get it.  I've had to do that with every short sale and put it in my outlook calendar, a note to either call the bank (when I'm the listing agent) or call the listing agent when I'm representing the buyer.  I wish I could give you better news, but that is what I would recommend, telling your buyers agent to please call the listing agent each week and put a reminder on your calendar to call your agent to make sure they do it and get you frequent updates.  You know what they say about the squeaky wheel!