Fighting HUD in an FHA Short Sale

It’s sort of surprising in a way but many home buyers in Sacramento do not know what kind of loan they have, especially after a few years pass since closing. From their point of view, it doesn’t matter. They still owe all of that money for decades. Whether their loan was FHA or conventional or VA, who cares? But it makes a difference if the seller needs to do a short sale. The rules are very different.

Whenever this Sacramento real estate agent approaches a short sale, the very first thing I do is figure out the seller’s type of loan. If the loan is FHA, for example, there is no requirement to submit an offer with the FHA short sale request. That doesn’t mean a seller might not want to submit an offer, as there are reasons for it, providing the buyer is willing to wait, but it’s not a requirement and, in some situations, it can be a much easier process without an offer.

We had a short sale recently that could not close. It was the first short sale in a long, long time that had been rejected without hope of any further action. Ordinarily, I do not give up; I continue the fight and, if the bank says no, I reconfigure the short sale package and resubmit. Eventually, the banks say yes. But when HUD says no, it means no. To protest would mean fighting the department of Housing and Urban Development.

One can request a variance and build a very strong case. But after that case is presented, it’s sort of like getting an opinion from Superior Court. One could appeal but an agent can’t do it. It takes a lawyer to do it at that level.

Sometimes, clients forget that Sacramento real estate agents are not lawyers. We might seem that way, but we do not have a law degree, we cannot give legal advice, and we cannot practice law, even if our shoes are nicer.

In this particular situation, even though the home was not habitable, HUD rejected a variance request. This was a round peg trying to fit into a square hole. Apparently, there is nothing in HUD guidelines that deal with homes that are uninhabitable. Because the bottom line is when you’ve got Lily Tomlin in her telephone operator role running HUD, the answer tends to be no, especially when they can’t figure it out.