Short sales: why banks don't answer your phone calls

Posted by: Peter Coy on February 25, 2008

Frank Borges-LLosa

Frank Borges LLosa (pictured) has a great blog item on why banks drag their heels on approving short sales—that is, sales for less than the mortgage(s) on the property.

Two big reasons:

1. If the bank is collecting monthly payments from you while you try to find a buyer, it will get more money by delaying approval.

2. If the bank is protected by mortgage insurance, it can actually make out better by letting a foreclosure occur (and collecting insurance) than by accepting a short sale (and not collecting insurance).

Frank says that in Arlington, Va., where he sells houses, only three short sales have closed out of 65 listings—a rate of about 5%. The success rate is so low that he calls short sales “fake listings,” a source of frustration to all concerned.

If you are trying to get a bank to OK a short sale offer and for some mysterious reason no one is getting back to you despite numerous phone calls … now you know why.

For more information on short sales, check out the long string of excellent comments on Hot Property’s own thread on the topic, here.

Reader Comments

Lance - Houston Real Estate Expert

February 25, 2008 10:57 PM

I have another reason you why you don't hear from the banks on your short-sale... they're overwhelmed by the volume and just can't handle it.

That's my theory... I worked on three short-sales towards the end of last year and all three fizzled out and ended up as foreclosures. They would have done much better accepting our offers but they just could never get to working on the files....

Marcio - S. Florida

February 29, 2008 12:53 AM

It's absurd that the banks will take a 100K loss with no consequences to the buyer's credit.

Shorts sales always existed and were rarely used because they don't make sense for the bank.

Most banks are just stringing the buyers along the short sale getting small payments until the house goes on foreclosure.

I completely agree with Mr. Llosa. Short sales are fake listings and are worthless to begin with..

Don't waste your time with them.

Scott

February 29, 2008 10:43 PM

I just did a short sale today and the reason why the banks don't get back to you is because the processors are carrying a case load of 450-500 short sale request per person. The key is to find out who is assigned your case and call them twice a day for a status. Be nice and polite every time and in the end they will approve your case because they are sick of you. It worked I closed in 29 days of request !

chris

March 7, 2008 12:48 PM

Scott who was your lender? and how much were you able to unload your property for, My property is worth 675,000 i paid 850,000 for it. 1 & 1/2 yrs ago.

Short Sale Advocates

March 9, 2008 12:02 AM

Frank is apparently dealing with listing agents that are well meaning but unskilled at short sales. The vast majority of Realtors are great general practitioners, but short sales are like trauma surgery. Besides, of all the listings in my area of Southern California, only about 10% of the homes are selling and about 30% are distress sales.

I'm closing 2 escrows next week for short sales and have about 50 listings in various stages of the process. 7 in escrow and 5 more should have an approval within 2 weeks. And yes, not all succeed. Sometimes the seller just doesn't cooperate through the process.

Scott is absolutely correct. Except if you have Countrywide and their appraiser Landsafe gives the short sale a value of $30k higher than their model match REO in the same tract.

We help Southern Californians get out from under their homes. ShortSaleAdvocates.com

Ken Wagner

lossmit

March 15, 2008 1:00 PM

You fail to mention the fact that the banks are udnerstaffed for the volume of shortsale requests being submitted. Sometimes you have one person making shortsale decisions for the entire country. The turnaround time is going be a while in a market like this. Especially you are asking the bank to take a major loss. Your article was not totally incorrect ...but there are other factors that should be mentioned. If it makes more sence to foreclose that is what will be done. If the shortsale makes sence, the shortsale will be approved. However, keep in mind the deal has to make sense to the bank, not the realtor or homeowner. By the way, why would a bank take a loss on somone who is making the monthly payments? Obviously they can afford to make the payments and the bank will assume there is no hardhsip. The bank will help people in need...not people who made a bad investment and can't get rid of the property for what it is worth. Also if you aren't getting a call back...are you sent in all the info that was reqeusted??

kevin

April 10, 2008 1:59 AM

I think everybody is right thus far except Ken (who I think pumped up his resume, and used this blog to plug his website) Mostly I think the banks are holding back. Realtors are throwing low ball numbers on the MLS generating as many offers as possible and often lieing about present offers on the table, and the amount. They may be drawing PMI payments, but in the meantime, the home winds up vacant so long it becomes a party place for tweakers, and a public toilet, and theives get everything but the framework, the seller loses his home and still gets 1099'ed. Now the bank has to pay forclosure fees to the attorneys, And comps for the area sink that much lower. It would be good for everyone if the bank would approve a price, say 15% under comps, take the first offer at that price, change the status to pending, and close. Seems the banks are stymied by their own greed. The reverse happend during the spike, but we still have the situation. Greedy banks and scandeous Realtors ( and mortgage brokers)

Jared

April 26, 2008 12:20 PM

I actually agree with Ken. The banks are not holding off at all. Yes, if you bring a low ball offer to the bank then you probably wont get a yes. You actually have to prove what you are throwing at them. I have 5 short sales in escrow and have closed approx 10 in the last 3 months. I have yet had any short sale not go through, but I have had some close calls. For example, I had a short sale close a day before the REO agent was assigned the listing. That just tells you how well the banks are able to communicate within their different branches. The banks are getting better with negotiation, so prepare your buyers. If there is a low ball offer, prepare them to increase their price a little. Make sure your package is complete, don't bug the person 2 times a day unless you are getting close to foreclosure and you have no choice. Depending on what stage you list in the foreclosure process makes all the difference. Now the second lien holders are a whole other issue. Be prepared to get creative to get those guys to sign off.

L

May 19, 2008 4:48 PM

I am trying to negotiate a short-sale with WAMU and they are making it impossible. Is there not some sort of law that places a timeframe on the banks response? How is it possible that they are allowed to make you jump through hoops and then just foreclose without speaking to you? If they are backlogged they need to impliment a SHORT-SALE PROCEDURE. How backlogged are they on credit approvals? I bet not so much. Considering the size of the financial mountain that is going to fall, shouldn't they be obligated to deal with the situation rather than blow everyone off? I know I am in default and have no right to make demands but WAMU sent me the Short-Sale Instructions and I supplied everything they asked for. DON'T THEY AT LEAST HAVE TO GIVE ME ANSWER? I'm tired. If they want me to walk away, I will. I have no choice. JUST TELL ME. Don't ask me to submit my life on paper (over and over) and then not speak to me. This is ridiculous - Either you do short-sales or you don't. TELL US.

Robert Gonczy

May 28, 2008 3:17 AM

My wife and I are purchasing our first home and we found a home that we like for 250,000, come to find out that it is a short sale. We offered 255000 and I was wondering from all of your experience do these normally get approved? The bank is Wells Fargo and we even deposited 5000 in bank to show a little equity and we are already pre approved through Wells Fargo also. It has been approximately four weeks since submission of our offer. Additional question would it be considered unproffesional to call the bank ourself or should we stick with our realtor to handle the details? If you have any advice I would surely appreciate it.

L

May 29, 2008 10:07 AM

Hi Robert. Unfortunately, as the buyer you will have to wait and hang out there until the bank decides to contact the seller, seller's atty, or seller's realtor. Unless you are given authority to speak on the seller's behalf, no one at Wells Fargo will give you the time of day. I (as a seller) have finally had some luck, but only by being insanely persistent. Perhaps you should light a fire under someone's a$$ by having your realtor contact the seller's atty. I'm sure you have an end-date on your sales contract. Tell your realtor you will not extend the contract unless you get a firm commitment to close from Well's Fargo. Otherwise you will be hanging out there for an eternity with no guaranty you will ever close. Of course, you have to be prepared to walk away. GOOD LUCK.

Russ

June 12, 2008 9:00 PM

I have three short sale purchase agreement that is still in process and they all are taking a long time. The first one we bailed out and the second one the lost mitigator lost the purchase offer twice and finally verbally regected the offer. They both had the offers over 30 days. The third one is still in process and was accepted by the lender and will take another 15 to 20 days ????? These should not be call short sales rather "long sales" NOT GOOD REAL ESTATE BUSINESS in my opinion.

B

June 18, 2008 12:30 PM

It's pretty sad that I am seeking comfort reading about others' bad experiences with short sales. How I wish I had done more research prior to making an offer on one more than 60 days ago. They are now ignoring an addendum I sent to allow me to continue to seek a home while in process. I have found a less expensive home but am held hostage to the coven of snails masquerading as bank employees. I can't even get an answer if I can give up $2000 earnest $ and walk away without risk of them suing me. I wasn't the one who didn't pay my bills, but now feel like the bad guy because I'm fed up with this SERIOUSLY flawed process.

Diane

December 18, 2008 9:39 PM

Nobody can hold you hostage, unless your offer was poorly written. You can always withdraw the offer. Check with your realtor.

Shannon

February 4, 2009 6:36 PM

I have an offer on a short sale property right now. I submitted the offer on 1/4 and the listing agent had my deposit check cashed and deposited into escrow on 1/5. The seller accepted and signed the offer and the lender had already agreed to a short sale before the process got started. the listing agent told my agent two weeks ago that I'd hear back FOR SURE last Friday but no word has come (it's Wednesday 2/4 today). Should I look at other homes? How hard will it be for me to get my deposit back? thanks everyone!!

Derek

February 16, 2009 8:18 PM

I have a situation with a short sale that seems strange. The lender stated that they would accept $105k NET for the property. My seller is past due on their Home Owner Association dues by $3,500. However, after commission, past due HOA's, closing costs, etc., I actually got the lender a NET of $107,000. I submitted the final documents, including the HUD for review. The lender came back and said that they would not accept the deal due to the fact that the investor was not going to pay the Home Owner Association anything more than 10 percent of what was past due. They are NOT reconsidering. It seems strange that I got them $2k more than the BPO, but they are willing to let this foreclose months from now over a stipulation that they created and control. Thoughts?

vanessa

April 27, 2009 9:43 PM

I feel your pain, I have a condo in So Cal that the bank is willing to foreclose on unless I sign a $30,000 note, in addition to the short sale. The property had PMI so they lose nothing if it goes into foreclosure. They first said that they would take a higher offer in leiu of the note, but now that we have a higher offer (what they were asking) they say no deal unless they have the note as well. I truly believe that they will lose more in the long run with all the fees of acquiring the property, but I guess such as the first was my gamble now it will be theirs.

Joe

May 7, 2009 11:42 AM

I have been doing short sales now for about 3 years. I was in Las Vegas, where 95% of all homes sold are either short sales or REO. The big problem I see is two fold. One, agents do not ecplain the process to their buyers and two, most agnet should not be doing short sales. I have a saying, "short sales are long sales". I am now in Southern California and the short sales here are here not as bad as Las Vegas. The key to closing a short sale is to do your homework. If you do not know what to do do not attempt a short sale. Hire either a professional real estate agent who knows how to do short sales or an attorney or a combination of both.

Diane Wheatley-SoCal

June 8, 2009 7:10 PM

Wow Vanessa, It was like reading my own post. I just had the same thing happen to me with a condo here in Socal. We need to be more cognizant of whether the notes are insured prior to taking the time to work on these short sales. What incentive is there for my seller to sign a note? She would just assume walk away. And who owns the home after foreclosure? The lender only or the lender and the PMI company??

donna

July 24, 2009 3:04 PM

The truth is that the Government WANTS your house. They want the car industry, medical industry and ALL the mortgages. Currently, they own 70% of all mortgages.

M

August 5, 2009 5:46 PM

My parents live in MI. They were hoping for a short sale but were denied because they have no debts and posses good credit. So they are penalized for this??? That is absurd. How can a bank like Fanny Mae punish people for having good credit? The reason that they had to go this route is because both of them are in their 70’s . One of my parents just got laid off and now they are having a hard time making the payments with just one person’s salary. Yet they are still paying on time because they are not living so lavishly…like all the others are.

It’s ridiculous that banks will approve short sale for someone who buys a million dollar home; with the knowledge that they cannot pay the mortgage and has thousands of dollars in debt because they chose to live beyond their means. This is the world that we live in….where good people does not have a chance to live the right way. They are forcing people to walk away from their homes. Fanny Mae needs to open their eyes!!!!
This is CRAZY!!! What kind of nonsence is this????

KIm

October 21, 2009 4:19 PM

I am waiting on a short sale in VA my agent was told by the seller agent that the process was 95% complete when we put our offer in. Well, It's been four weeks. What does that really mean?

jo

November 13, 2009 2:28 PM

i am waiting to buy a short sale. my offer is the only one the bank took, it is a cash deal, all paperwork has been in and approved bpo, etc. deadline was 11/04/09 to finalize, then changed to 11/18/09 or anyday now. have been waiting since 9/4/09. tired of waiting! anybody have any advise
jo

jo

November 13, 2009 2:28 PM

i am waiting to buy a short sale. my offer is the only one the bank took, it is a cash deal, all paperwork has been in and approved bpo, etc. deadline was 11/04/09 to finalize, then changed to 11/18/09 or anyday now. have been waiting since 9/4/09. tired of waiting! anybody have any advise
jo

Steve

November 17, 2009 11:22 AM

Jo,

I hope it goes through for you. I have been trying to Short Sale a home for 3 years. I had to stop paying for the bank to take me serious. Unfortunately I have lost 7 deals due to lost paperwork, delays, six months with no responses. I fired one Loss Mitigation Company out of Utah and now have one in California. Even these companies are overwhelmed and understaffed. I have had to call and do my own discussions with the Loss Mitigation People at the bank. This has been a grueling process. My realtor has closed quite a few Short Sales and yet mine continues to be bogged down with unbelievable problems. The PMI company has not made it easy either. The home will probably be foreclosed on. Honestly, the bank made a major mistake in July '07 when I had an offer that was 10K under what I owed. They would not come to terms with me and delayed it to the point the people walked. The banks just don't care.

Susan

November 25, 2009 2:36 PM

My house has been under contract since 7/31/09. The second mortgage holder came back with an approval right away for $8,000 and will not budge. They would rather take their chances with a foreclosure where they won't get a dime. The first mortgage holder only wants to give them $3,000 take it or leave it. The first mortgage on 11/16/09 remember this started on 7/31/09 finally gave it the managers approval. Now it is sitting in the hands of the Mortgage Insurance department for final approval. What the hell is the mortgage insurance dept and why are they delaying this even longer? My buyers are going to walk away so and rightfully so. The second mortgage company won't grant and extension and their approval is up on 11/27/09. What can we do?

DeAnna

January 27, 2010 3:18 PM

I've been waiting since June 2009 to purchase this short sale in So. California. In November BofA finally decided to close but gave me 10 days,my loan officer said he couldn't do it in 10 days, so BofA sold the loan to Chase. Now Chase is sitting on the loan since November while my loan officer is asking when can you close? Its madness! In the meantime, I just found out the house I'm renting just went into foreclosure...is this crazy or what!

Carol

March 15, 2010 10:09 PM

Hello everyone,
After reading this complete page of comments. I feel bad for you people. Like my husband always says,
''it's not what you know but who you know''. That also applies to short sales. If you have a short sale and you want or need help. My friends Kristina Smith and Pat Martin from YLHG have all of the necessary contacts through out the USA to get your short sales done fast. Check out what this Remax Broker has to say about doing business with my friends. If you need help with your short sales contact Carol @ 450-474-6988
to set up an appointment.Thanks and have a super short sale day. I have enclosed the Remax reference below:


Eileen Tefft, Remax Connected, Seattle Washington

"YLHG is the absolute best way to get a short sale closed. There is not another short sale investor in the country with the high success rate for both closing and getting the agent paid, but also, and more important for your client, get a satisfaction on their mortgages and avoid foreclosure.

Their success is because they have the process nailed and the lenders trust them to resolve all the issues involved with the short sale loss mitigation of which there are many. They get right to the top of the loss mitigator chain, something mere mortal agents and investors simply cannot do.

My agents are trained to do short sales. When they find a short sale that YLHG wants, they say ‘yahoo’ because it means that

1.it will close and
2.they will get paid a full commission and most important,
3.YLHG pays for all the negotiation saving at least 100 hours of sitting on hold.
I highly recommend this company and personally would use no other." Call
Carol now for an appointment. 450-474-6988

Carol

March 15, 2010 10:13 PM

Hi everyone,
If you need help with your short sales, my friends Kristina Smith and Pat Martin
are experts and they literally get the job done. Do you need short sale help?
Contact Carol at 450-474-6988.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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