Los Angeles Living

Are you a buyer concerned with the slowness of your short sale purchase?

As a member of Short Sale Superstars, I see many buyers writing questions to the members regarding their own transactions that are not going as well as they had hoped, and wondering if their own agents are doing as much as they can do.  All of us who are members try to address their responses directly to help them cope with their short sale purchases so that they understand that their agents are usually doing all they can and why they can't just talk to the bank themselves.  

It is frustrating to feel that you are being kept in the dark during negotiations, but one set of issues is seldom addressed head-on on the site, and will help explain why the delays often occur.

The lender who seems to engender the most questions and frustrations is Bank of America, but many of the problems that buyers have result from a lack of understanding of the process and of the bank's role in it.

First of all, as a short sale buyer, I'm sure that you have been warned that there is nothing short about the short sale timeline.  The only thing that is short is the amount of the payoff that you are asking the bank to accept on their outstanding loans made to the seller.

The bank has somewhat of an understanding of the depressed market in your area, but will obtain either a full appraisal by a licensed appraiser or a BPO (broker price opinion) from a licensed real estate agent in your area, in order to determine what the appropriate sales price should be.  In most cases, the listing agent has already conducted a study of comparable sales in the area to determine the correct listing price - one which an appraisal or BPO will support once your offer is submitted.

If your offer is lower than that listing price and/or contains a number of contingencies, it might be rejected right away - especially if there are competing offers submitted.  Some banks will ask for just the highest and best offer to be submitted, while other banks will want all offers submitted to allow the bank to decide which should be accepted.  This can make the wait for approval, rejection or counteroffer to be a longer one as can the wait for an appraisal to be prepared, submitted and reviewed.

The seller, on advice from the listing agent, will make an initial determination of what may be acceptable to the bank, and will accept and submit that offer, but remember that the contract is contingent upon approval by the bank, and is not enforceable until that approval is received.

It is the listing agent alone who will likely have the written authorization from the seller that will permit him or her to discuss your transaction with the bank.  Due to federal privacy laws, it will do no good for you or your buyer agent to call the bank, because the bank is forbidden to discuss the seller's financial situation without that written authority.

In addition to the great advice you have probably already received from your buyer agent, you should know that B of A owns only about 4% of the loans it services. For the rest, they are only collecting monthly payments for investors. If they
do not own the loan(s) it services on your transaction, any approval will have to come from the investors. B of A has its own set of requirements and protocols which the deal must meet, but the investors have their own set, so your deal must meet both. And if there is MI (mortgage insurance) on the loan, there may be another whole set of criteria and approvals.


The B of A negotiator has to not only negotiate with your listing agent,
but must negotiate with the investors and MI folks, and a rejection from any of them will necessitate that your offer be rejected. All of this takes a lot of time. And each negotiator has a lot of offers they are negotiating at the same time as yours.

And to top it all off, even if it is not receiving monthly payments from the borrower, B of A is required to keep making monthly payments to the investors, so they may have little incentive to rush. They are still getting their income, so they are not losing much by delaying. Of course B of A will be allowed to reimburse itself from the investor's proceeds when the deal settles, but meanwhile, the investor says "Why hurry?" B of A may actually be anxious to close, but can't without the other approvals.


It may also be something as simple as a deadline for approval contingency in your offer that kills the contract, if approval isn't received within a certain amount of
time. In that event, the bank may consider that your offer is dead and you might have moved on to another deal. Always check that date, and make sure that when you have an offer in, if the contingency date is nearing expiration, submit an addendum that extends the date.


With these facts in mind, if you are having trouble getting an approval and maybe even get a rejection, see if you can find out what would give your offer a better chance. It might be that you are asking for concessions (like closing costs) that they are unwilling to pay, and if you clean those up and resubmit your offer with comps to support your offer price, your offer might fly. And/or you might want to sweeten the price a little too. Analyze your offer closely because the
cleaner it is the better chance you'll have.

Be sure that the listing agent is willing to give your buyer agent weekly updates on their negotiations, and understand that there may be weeks when nothing new happens from your perspective, even though there are frantic negotiations happening to which you are not privy.

Good luck and remember to have patience!

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Full time real estate services in Fair Oaks CA, with friendly professionalism, 20+ years experience. I work hard to give my buyer or seller a low-stress transaction.

"Happy clients make me happy."

For all your real estate needs or questions, call me at (916) 705-8951 or visit my website at www.SusanNealFineProperties.com.