Warning for negotiators and lawyers - Banks proceed to sale

[DrShortSale]

What is the name of your state (only U.S. law)? California

Banks are leaning against approved short sale payoffs. They will bid the payoff amount at the trustee sale to see if they can get more. You have to make sure they will postpone the sale. I have seen this with 2 major banks and I suppose this is happening with other ones.

 

[FlyingRon]

Duh?

Why would a bank bid more than what they have in the property? All that would do would be to bail out the junior lienholders or perhaps the defaulting borrower.

They are also unlikely to stay their foreclosure proceedings on the mere hope of a short sale.

 

[DrShortSale]

Im not saying they are bidding for their loan amount.

If they have a loan in default for 300,000 and have approved a short sale where they are receiving 150,000 as their net proceeds they are not canceling the trustee sale and are actually bidding 150,000 at the trustee auction before the approval letter has even expired.

 

[nextwife]

I work for a bank in adifferent part of the counrty, and by the time Sheriff Sale rolls around, we sure are not all that interested in a short sale anymore. We want a short sale so that we don't need to incur all those legal costs. Additionally, we can often sell them ourselves at lower closing costs than when some "short sale broker" comes in and tacks a bunch of additional fees on top that we wouldn't be paying if doing an REO sale.

Honestly, if one is already through the entire foreclosure process, and the property has already been sitting on the books as Non performing asset all that time, most last minute short sale attempts are usually delaying tactics-we may postpone confirmation of sheriiff sale if a legitmate short sale is due to close shortly, but we won't postpone the sale (unless the buyer is financed through us and we KNOW they are good-to-go). Many sheriff sales take a year or more to occur following initial default. If they threw a Ch 7, or Ch 13 in there, I've had foreclosures go two years. Even more if they do a series of Ch7 & 13 filings. Once the bank finally arrives at SS, they are not going to postpone if an approved short sale hasn't closed already. We'll simply wait a couple weeks more before scheduling confirmation.

Additionally, I see a great many foreclosure in which the house is worth more, empty and cleaned up (it is amazing how many foreclosures I see owned by "horders") by us, than when the owner is still in it. There are many cases in which we do our short sale analysis, send in our broker for evaluation, and hear back that the place is a pit, and having the tenants and owners out will add back to the value. Which creates a disincentive for those properties to be sold short prior to SS. In our shop a short sale means more before we have sat in FC for nearly a year- and before we were forced to accrue all those legal fees. If one wants a short sale, do it early in the game bso we don't have to sent it to the attorney.

 

[FlyingRon]

Im not saying they are bidding for their loan amount.

That's exactly what you said

If they have a loan in default for 300,000 and have approved a short sale where they are receiving 150,000 as their net proceeds they are not canceling the trustee sale and are actually bidding 150,000 at the trustee auction before the approval letter has even expired.

Until the short sale closes, the foreclosure is fair game. Given the long lead time for notices and publication why would they stop that just because someone has asked if the could short sale?

 

[nextwife]

That's exactly what you said


Until the short sale closes, the foreclosure is fair game. Given the long lead time for notices and publication why would they stop that just because someone has asked if the could short sale?

This is espicially true because many of the so-called "prequal" letters provided by buyers from mortgage brokers are so multiconditional that they aren't worth the paper they are written on. Many times, the lender hasn't really run the credit report first, and has no real clue if the loan DOES indeed meet the underwriting criteria of the lender.

Additionally, in my experience, too many mortgage brokers act as though the contractual closing and funding date is merely a suggestion, and not as important a part of the offer as is the price. When we select between offers, closing date is extremely important, and we will not accept mortgage brokers playing games at the last minute adding new requirements or doc requests.


In other words, they don't consider it a done deal until the proceeds check is in their hands.

It's not over 'till the fat lady sings.