california short sale law

Closing a Bank of America Short Sale After Two Years

Bank-of-America short saleIt’s not really fair to call this a Bank of America short sale when in reality it is actually a Bank of America short sale with Fannie Mae as the investor, which is a different kind of animal from other types of Bank of America short sales. When Bank of America is merely the servicer, it means Fannie Mae short sales are handled differently. In fact, Fannie Mae now has its own website for submitting short sales, which tremendously expedites the process.

But the procedure and short sale process still needs to follow Fannie Mae guidelines, which at times, I realize, can be difficult for sellers and buyers to wrap their heads around. The valuation placed on some Fannie Mae properties astounds other real estate agents. I suspect it’s because we work under the premise that valuation means market value, like an appraiser would do it, but that’s not how Fannie Mae seems to work. Its valuation, I suspect, has more to do with whether it is more economically feasible to sell at its suggested valuation over being paid to do a foreclosure and, yes, banks make money on foreclosures.

This supposed simple short sale began life as a Cooperative Short Sale. I met with the sellers in August of 2012. We listed the home and signed the paperwork for the Bank of America short sale to proceed as a cooperative, with no financials, sort of a short path to a preapproval. REDC was involved as the third-party vendor, which added a bit of red tape, and what usually would take Bank of America 10 days ended up taking 45 days, but we eventually received a pre-approved price for a Cooperative Short Sale that was $80,000 over the comparable sales. Not yay for us.

That Fall 2012 Sacramento real estate market was one of the hottest markets I had seen for 7 years. We held numerous open houses that should have resulted in a half dozen offers and nothing. No nibbles. No offers. We finally accepted an offer we believed to be reasonable and submitted. It was rejected. Over the next two years, we submitted a total of 5 offers, each a little bit closer to the price Fannie Mae expected. At one point, on Thanksgiving Day, I kid you not, a guy from REDC called the sellers and threatened to close the file if the sellers didn’t immediately submit a document he suddenly wanted.

The home needed work. On top of this, the roof was shot and at end of life. This meant either we needed a buyer who would pay cash or a buyer able to obtain an FHA 203K loan. Investors called and begged us to take their offer. These buyers felt we were being obtuse and cruel but in reality, after 4 rejections from Fannie Mae, it became pretty clear even to the most dense of us that we had better the submit the offer Fannie Mae expected if we wanted to receive short sale approval.

At another point in this short sale, I made a deal with the third-party vendor hired for this Bank of America short sale and obtained verbal approval for a lower price from Fannie Mae. We submitted an offer at the slightly slower price, and Fannie Mae then promptly demanded another $5,000 on top of it. The investor walked. Over $5,000. I couldn’t believe it. This is a fabulous neighborhood in Carmichael, and many of the homes around this particular home are much larger and in better condition.

It was a little disheartening, listening to buyers after buyers yelling and screaming at me on the phone about why we refused to accept their offer. They called me names. They swore at me. They wrote mean emails about me. They insisted I was prejudiced against investors. They just could not understand that this was not my call nor my decision. They felt they knew better how short sales operate, even though they may have never dealt with a Bank of America short sale through Fannie Mae, and this Sacramento short sale agent has worked on Fannie Mae short sales for years.

We finally got to the point this summer when market value had moved up enough, even with the mounting repairs and required new roof, that a buyer who wanted to live in the home decided to make an offer. At list price. A foreclosure notice had already been filed and we were in the final 21-day countdown to a trustee’s auction. I cried, I pleaded. We then received approval from Fannie Mae on this Bank of America short sale in 18 days. It was a miracle.

And you know what’s really odd about this? This was the first time ever in which we were able to stop a trustee’s auction due to short sale approval. We were literally days from foreclosure, but once we received that short sale approval letter, all foreclosure proceedings had to cease due to the California Homeowner Bill of Rights. We were saved in the nick of time. I’ve always felt that the dual tracking portion of the law passed in 2013 was pretty useless about stopping foreclosure during a short sale because it doesn’t apply to short sales until January of 2018 (when we probably won’t need the law) unless we get short sale approval. Generally, by the time we get approval, we still have plenty of time to avoid the foreclosure, so it doesn’t matter.

But in this case, our California short sale law made all the difference in the world.

We closed today, 30 days later. See, this Sacramento real estate agent does not give up, regardless of what I have to go through to close a short sale, I hang in there and make it work for the seller. But no short sale should have to drag on for more than two years like this Fannie Mae / Bank of America short sale in Carmichael.

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