Sellers Who Refuse to Close a Sacramento Short Sale
Never thought I’d run across sellers who refuse to close. Sellers always want to know how long it will take for their short sale to close. From listing to closing, that average time period is 90 to 120 days. That’s because the average time for short sale approval is 60 to 90 days. Once the short sale approval letter is received, most banks give the parties another 30 days to close escrow. Every so often, a bank such as Bank of America might allow 45 days for closing, but 30 days to close escrow is about the norm.
This doesn’t mean that your particular escrow will close 30 days from short sale approval because your particular escrow closing period is defined by your Residential Purchase Agreement. Right on the first page, close to the top, there is a box that will probably be checked and the number “30” or “45” written into the space. That number could be “10” or “14.” The closing date is defined in paragraph 1 D. It can also be written into the blank line such as “10 days after bank approval.” But whatever date is agreed to as closing, it always follows the short sale approval letter. The time frame for closing begins on the date the short sale approval letter is received. In the event of dual lenders, the time frame begins when the second approval letter is received.
If the buyer needs to get a VA loan or some other type of loan that might take a few days longer, one might need to get an extension to the short sale approval letter. In other words, the parties to a short sale can close sooner than the date in the approval letter if the purchase contract so stipulates, but cannot close later than the date in the approval letter, unless the agent obtains an extension from the short sale bank.
Closing escrow after short sale approval is sometimes very stressful for sellers. Especially if short sale approval is received faster than the Sacramento short sale agent initially estimated. Lenders are unpredictable at times. There can be no rhyme nor reason why one month the approvals take 90 days and the following month, an approval arrives at 4 weeks. Approval times like this can throw a seller into hysteria. A seller might not be prepared to move, either financially, or emotionally, or both.
To be fair to all parties, though, if a seller has concerns about closing and moving, the first thing the seller should do is talk to her short sale agent about it. The last thing a seller should do is wait 3 days before closing to announce that the seller is unprepared to move. Sellers who refuse to close can cause extreme havoc in a transaction and incur legal ramifications.
If a seller needs more than one extension in a short sale, the bank is within its rights to withhold that extension. Often banks will not issue a 2nd or a 3rd short sale extension. Furthermore, the bank can cancel the short sale. A seller can’t call the bank and ask for an extension, because the seller won’t be speaking to the short sale negotiator but instead will talk to a customer service representative who is not authorized to give out that type of information — and might not be able to decipher notes in the file even if she has the ability to discuss it.
When a short sale starts over, it means several things. First, there will most likely be a new BPO completed. That means the sales price can change. Moreover, if the seller qualified for a HAFA incentive, the bank might not allow the HAFA the second time around. Disqualifying for the first HAFA is often grounds to dismiss any further HAFA actions. But in actuality, the worst that would happen is the seller would need to find a new buyer, which is the place the seller was in when the short sale first began. It’s not a big headache for sellers to refuse to close a short sale.
But it is a huge, gigantic headache for the buyer who has paid for an appraisal, paid for a home inspection, canceled utilities, transferred mail, lined up movers, packed up the house and was ready to move until the bombshell fell. It’s risky to try to buy a short sale because nobody is gonna make the seller close escrow if the seller doesn’t want to close. There is never any guarantee that the seller will close escrow.
However, it doesn’t mean a buyer doesn’t have recourse or that a buyer can’t sue.