What to Expect When Buying a Short Sale Home

buying short sale, foreclosureWhen buying a short sale home, you should know what to expect. If you’re having issues with buying a short sale, you can file a complaint.

By: Ilyce Glink and Samuel Tamkin

Q: We have been trying to buy a short sale for over a year and due to so many errors by Freddie Mac and the bank that held the mortgage it has now become a foreclosure. As you probably know, the rules constantly change.

The kicker to this is I have sold my old home. The bank allowed us to move into the property we want to buy under a lease agreement since they said that closing would be a matter of dotting some “I’s” and crossing some “T’s.”

Freddie now says we have to move out since their rules say the home cannot be sold while it is occupied. Even though we had a verbal approval on our offer. I am reaching out to you to see if you could point me in some sort of direction to help resolve this. I have contacted my congressman and state rep but they have just blown me off. I have great credit and have been preapproved for the purchase.

And I will gladly accept the home as is without our government having to spend one more dime of your money or mine. Seems so simple. Can you help point me in a direction.

A: For a short sale to work, you need a willing seller and owner of the home. If in your case, the owner of the home has disappeared, and it appears the lender can’t work with you to sell the home. The lender doesn’t have title to the home and can only get title to the home if the owner transfers the title to the lender or the lender forecloses.

If you and the seller have been working together to try to get the short sale through, then we are at a loss as to why the lender would allow you to move in when they don’t own the property. The owner would be the one responsible for renting it to you. If the lease is between you and the lender, you might have a beef with the lender. But if your lease is with the owner and the owner has disappeared or failed to cooperate with the lender, you may be in trouble.

However, if the owner is cooperating with the lender and has submitted all the documents for the short sale to occur, you need to investigate further who has submitted the documents to the lender and whether a final approval for the short sale was obtained. If you have all of that information and now the lender has decided to ignore the owner’s request for the short sale, you have to evaluate your options.

You should probably file a complaint with www.helpwithmybank.gov and FHFA, which regulates Fannie Mae and Freddie Mac. A complaint with the Consumer Financial Protection Bureau (CFPB) might help, too.

And while you might not want to, you might need to join in the foreclosure suit. Depending on the information you have by email or correspondence, you might have a case against the lender. The real question is why the lender has decided to ignore your offer to purchase the home under a short sale. Another important issue is whether the home was actually foreclosed or whether the suit of foreclosure is still ongoing. Depending on how much time and money you’d want to spend, you might want to get an attorney involved.

Keep in mind that hiring an attorney could be expensive and you don’t want an attorney learn the ropes of how to fight the foreclosure and lender on your dime. You want an attorney with significant experience with foreclosures and these types of lender issues.

It’s possible that you might be out of luck on this one and may have to just find another house rather than fight the lender. While you may think that Fannie Mae may be at fault, it could be the lender as well. During the entirety of the housing crisis, it seemed that the short sale negotiators were working with the owners to sell their homes to buyers while at the same time working the legal process to foreclose on those same homeowners.

With that in mind, the government has promoted various programs to give lenders incentives to avoid foreclosure and get home into the hands of buyers. It’s unfortunate that your representatives in Washington are unwilling to help you if you have a legitimate right. However, you need to get more information about where you stand in the process.

Please email us and tell us what you find out and what happens.

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About Ilyce Glink

Author of 13 books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Writer of the nationally syndicated column, “Real Estate Matters.” Top-rated radio host in Atlanta. Writer for CBS MoneyWatch.com. Managing editor of the Equifax Personal Finance Blog.
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2 Responses to What to Expect When Buying a Short Sale Home

  1. Jeremy Martin says:

    Mrs. Glink,
    I am writing this to ask for your help regarding American Equity Foundation. I went forward with them largely from your endorsement. You have always appeared to be concerned with the average person and giving them sound financial advice.
    We met with American Equity Foundation in Las Vegas, NV to see about their program to short sale our house and then rent it back from the buyer in March 2013.
    We researched the company and did not find any negative reports about them, in fact we saw your ringing endorsement of them on CBS Money Watch.

    After meeting with them we filled out their necessary paperwork and submitted the $300 membership fee. We were told that to ensure that we were economically viable to the investors we would need to make a $2000.00, completely refundable deposit that would count as our first and last months rent.

    We made the deposit in May 2013 via Pay Pal. We were contacted by their Real Estate Agent Tim Kelly from Remax concerning going forward with the short sale. He informed us that since we were current on our mortgage we were not giving any incentive to the Bank to agree to a short sale. He advised that we stop making our mortgage payments. We informed him that we did not feel that this was option for us, because of our religious beliefs. He said that he understood but that there was nothing he could do to help us. I then contacted the CEO of American Equity Foundation Christopher Nelson via e-mail about getting a refund of our deposit in early July 2013. He stated to me that it would take approximately two weeks to get us our refund. After almost a month without a refund I sent him numerous other e-mails regarding our refund of deposit. He consistently told me that we have not been forgotten and he would advise the accounting department to issue me my refund. This has not happened and it has been two months since I have made the request. Now he is no longer answering my emails.
    Please help me get our $2000.00 deposit back.
    Thank you for your time,
    Jeremy Martin

  2. Kerry Pearson says:

    I have a similar case in which we are living in a house that we are trying to buy as a short sale. A year ago we had agreement with the seller and bank to buy the property at a reasonable price. However, the sellers ex-husband filed bankruptcy causing a 7 month delay. Since then the bank (Chase) has done a BPO/appraisal and increased their asking price by 30K despite the seller signing a purchase agreement at a lower price. We increased our offer by 10k, but Chase reportedly still wants the 30k increased price. We’ve only seen one authoritative piece of documentation (letter on Chase letterhead) from Chase to seller accepting our original reasonable offer. Since then all we’ve seen is emails from sellers agent including extracts from some Equator system citing the increased asking price. What is the authorized data source appropriate for Chase to counter our offer? Who is really delaying this process seller, selling agent or Chase? Thanks

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