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Portrait of a Short Sale – Bank of America Style

Recently I completed a closing on a short sale which had a long, tangled history.  This particular short sale makes an interesting, if cautionary, tale.  Over two years ago,  in September of 2009, I listed a house as a short sale from someone who had relocated.  The house was vacant but in nice condition, located in Silverado Ranch.  The house was listed for $120,000.  By the end of September an offer had been made and we started talking with the lender, Bank of America, which held both loans.  We went through four buyers before finally obtaining an approval letter in August of 2010, by which time the second loan had been sold by Bank of America to Green Tree.   However, the approval did not waive the deficiency (the difference between what the property sold for and what was owed on the loan).  Under these circumstances, Bank of America would have six years to pursue the homeowner for that deficiency.  If the property was lost in foreclosure, the bank would only have six months in which to file a lawsuit.  Naturally, the seller declined to do the short sale and, as far as we knew, the property sold at trustee sale sometime in August.

In November, 2010, I received a call from the homeowner.  Bank of America had contacted her to advise that they had not foreclosed on her house and were offering her a “cooperative short sale.”  This is similar to a HAFA short sale, by Bank of America.  Bank of America was now willing to waive the deficiency.  The cooperative short sale is supposed to move more quickly than a regular or HAFA short sale.  We listed the house again in November and by mid-December were once again in contract.  This time, the buyers stayed loyal; despite the fact that the cooperative short sale was supposed to be a streamlined process, the approval letter was not issued until May, 2011.  Then, with closing barely a week away, the house, which had been vacant for over two years, was severely vandalized and no longer worth the agreed upon sales price of $110,000.  We tried to get the sales price lowered, but Bank of America refused to agree to a lower sales price.  Once again, the property went on the market, this time as a regular short sale; an offer was submitted to Bank of America in June and an approval with a deficiency waiver was issued in September.  The property sold in October for $75,000 , over two years after it was first listed.  Had Bank of America agreed to a deficiency waiver in August, 2010, the property would have sold for $120,000.

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