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August 1, 2014

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Buying a home? Beware of the not-so-short sale

A short sale may save the buyer money, but be prepared for hair-pulling frustrations

It's your turn

Do you have experience with a short sale? Was it good? Bad? Write a letter to the editor or leave a comment at the end of this story.

No one could have prepared us for the hair-pulling frustrations of trying to buy a house in the Las Vegas marketplace.

I was moving my family from Kansas in 2012, and it seemed like a great time to buy a home. Throughout the valley, houses were available for a fraction of what they sold for only a few years ago.

There were traditional sales, foreclosures and short sales (where the lender allows the owner to sell the house at current market value, even if the existing mortgage is a lot more).

We decided to stay away from foreclosed homes and instead focused on either traditional or short sales.

Little did we know, a short sale is a real estate transaction that is easily convoluted and confused by pencil-pushing paper-shufflers at banks who seem to change the rules and expectations, offer hollow assurances and show no empathy for anxiety-ridden customers as the process unfolds.

And so this is our cautionary tale for those of you who are thinking of pursuing a short sale. For starters, forget the word “short.” There was nothing short about it.

•••

The hunt is on

A year ago this month, I began work as an editor at the Sun after 20 years with a family-owned newspaper chain in suburban Kansas City.

With my wife, Lindsey, still in Kansas with our two kids while trying to sell our house, we began looking in Henderson because of its good schools, parks and proximity to work.

Our Realtor set up automatic emails to Lindsey and me of listings meeting our criteria: at least four bedrooms, two bathrooms, a roomy kitchen, and a yard where the kids could play and the dogs could run.

Lindsey, on the basis of some virtual tours, would select houses for me to check out. I began looking, mostly on weekends. After about eight to 10 showings over a few weeks, our Realtor arranged for me to see three houses on Saturday, April 7. I stopped that day after visiting the first house. This was it.

It was spacious, updated, clean, safe, had a beautiful yard and was within blocks of schools. It was being offered in a short sale.

We made an offer. Papers were signed here, scanned, signed in Kansas and emailed back. By the end of the weekend, the sellers had accepted our bid of $200,000.

We asked our Realtor the obvious question: How long now? She said some short sales could take six months or longer to complete, especially if there was more than one mortgage on the property. If it was a “clean” sale, it could be as few as three months. This had all the hallmarks of a clean sale.

Still, the uncertainty left us wondering; I needed to sign a new apartment lease and didn’t know for how long to make it. I signed a four-month lease with an option to continue month-to-month.

•••

The clock starts

In early May, I drove to Kansas to sign off on the sale of our house and to move the family west.

With the wife, two kids and two dogs in our Honda CRV, we arrived in Henderson on May 17, to a now-crowded two-bedroom apartment. Most of our belongings went into storage.

Lindsey was able to check out the house we were buying and loved it. We hoped for a fast closing.

Days turned into weeks before we got the first tangible development: Three months after both parties had agreed on a price and we turned our fate over to bankers, we were presented with a “short sale affidavit” from Wells Fargo that required our signatures “as soon as possible.”

Those words — “as soon as possible” — were music to our ears. The bank was in a hurry to get this deal done!

The affidavit was to affirm this was an arm’s length sale — that we were not related to the sellers and there were no side agreements in which we would be paying the sellers extra money on the side.

“This is good news,” our Realtor told us. “It’s on track.”

•••

Waiting is the hardest part

Clearly, this wasn’t going to be the “clean” three-month process we’d wanted.

By now it was the dead of summer. We made daily trips to the apartment pool, where the water was tepid at best. The novelty of a family of four living in a two-bedroom apartment had long worn off.

The next tangible goal, our Realtor said, was getting a BPO ordered and completed.

BPO is a broker’s price opinion, in which an independent expert — usually another real estate agent — places a value on a property. It’s a quick-and-dirty appraisal that helps determine whether the agreed-upon price between the seller and buyer will be acceptable to the mortgage holder. If the BPO comes in well above the sale price, the bank may ask for additional money, possibly putting the sale at risk.

It was up to Wells Fargo to order the BPO.

“It should be very soon,” our Realtor told us.

Why would we believe otherwise, especially since Wells Fargo had already wanted the earlier affidavit back “as soon as possible”?

This time, days turned into months.

Growing discouraged, we started looking at other homes. By now, though, housing prices had started to rebound, there was a shortage of inventory in the valley and sellers were getting multiple offers.

We made an offer on another home, about $3,000 higher than asking. We heard nothing back.

Summer came and went. Our four-month apartment lease expired and we were now month-to-month. Our rent and storage costs were nearly double what our mortgage payment would be.

•••

A decision comes

Wells Fargo still was weighing the short sale. There was still no word about the BPO. By Oct. 15, our patience with the short sale had grown, well, very short.

We called our Realtor to call off the deal. When she answered, she said she was about to call us. Wells Fargo had blessed the sale.

What about the BPO? It was completed about a month ago, she said, but the bank didn’t bother to inform the title company, which had been providing us with status updates. The house was ours once we arranged financing.

•••

Starting the loan process

In a short sale, the lender won’t let the buyer apply for a mortgage until the seller’s lender has signed off on the deal.

So with our short sale finally approved, it was time to nail a loan. We had been pre-approved with Wells Fargo but decided to go mortgage shopping.

Enter Bank of America.

Its rates were competitive. It had held the note on our Kansas house. Our bank accounts are with Bank of America. For us, it just made sense to go with it for the mortgage.

When we asked if the bank could turn around a loan before our estimated close of escrow on Nov. 12 — less than a month — it said yes ... if the underwriters were given everything they needed in a timely manner.

Pre-approval took minutes. Within a few days, we received a packet of loan documents to sign. Per instructions, I returned them to the bank within two days. Everything, our loan originator said, seemed in order. And to complete one last detail, my insurance agent would email a quote for homeowner’s insurance on the property.

It seemed our end of the work was done. Via email we heard from our loan processor, who would “be personally handling (the) home loan to ensure that everything goes smoothly.”

A separate email from the home loans manager for Bank of America in Las Vegas was a bit disconcerting, though:

“You’ve probably heard the process can be very frustrating and time-consuming in today’s highly regulated environment, no matter how strong a borrower you are. There will be lots of documentation requests, follow-up requests, and then even more requests, all the way to the end. Some will be easy to understand. Some may be impossible to understand. Please don’t let it frustrate you. Please provide all of the documents we request within 1-2 days to prevent delay.”

No argument there. Bank of America, it appeared, was in a hurry, too.

On Oct. 23, we locked in our loan rate: 30 years fixed at 3.75 percent.

My loan processor said she’d call me the following Monday to go over my Conditional Approval Letter.

•••

Those pesky conditions

The eight-page letter started: “We are pleased to inform you that you have been conditionally approved for a loan based on the information above and subject to the following:”

Uh oh.

First condition: “A Lock-in Agreement HAS NOT been entered into. The interest rate and discount points must be agreed to before loan closing.”

But wait. I got a confirmation email six days earlier from my loan originator saying, “OK LOCKING THANK YOU.” The loan processor said she would speak to our loan originator about it. I would hope so; they work at the same bank.

There were another dozen or so issues. Papers still needed to be signed by the seller, for instance. And my wife had to write a letter assuring the bank that I had access to our joint funds. It sounded strange since they were Bank of America accounts. Didn’t they already know this?

The bank needed these sorts of statements and letters, ostensibly, to comply with Dodd-Frank, the federal legislation passed in 2010, in part, to thwart predatory-lending practices on mortgages.

The clock was ticking. It was Oct. 29 and escrow was scheduled to close Nov. 12. And we had given notice to our apartment manager that we would vacate our apartment by Nov. 30.

It seemed doable.

•••

Communication woes

We worked our way through the loan processor’s checklist. Lindsey confirmed in writing that, yes, I did have access to our joint banking accounts. Yes, here’s a statement that I’m employed at the Sun. That recent $29 debit on our checking account? Oh, that was to Scholastic books.

On Nov. 1, I dropped a note to our loan originator: If there is anything we need or can do to help us meet our Nov. 12 close of escrow, let us know!

A week before the scheduled close of escrow, we got word the FHA inspector wouldn’t give his approval because the gas had been disconnected and he couldn’t check the furnace and water heater. Argh. The sales contract called for all utilities to remain on.

Southwest Gas said it wouldn’t be able to turn on the gas until Nov. 9 — three days before closing.

The clock continued to tick.

On Nov. 6, the loan originator wrote me, “I have turned in all the items turned into me.” I took the message to mean the loan processor had everything she needed.

But I would be wrong. The loan processor still had a lengthy list of conditions; she just wasn’t sharing the list at this time.

In an unpleasant conversation, I asked the loan processor to email to me and the loan originator a delineated list of what was needed to close the loan. I received nothing. In exasperation, I asked her in an email to participate in a conference call with the loan originator, me and my Realtor to go over her list.

Again, no response.

•••

First deadline shot

Nov. 12 — the day to close escrow — came and went. Only days before did it dawn on us that banks would be closed for the Veterans Day holiday. The only work that day was a trip by the FHA inspector to the house, but we didn’t know what he found.

We had secured a 10-day escrow extension from the sellers. But, they warned, this would be the last extension.

We were freaking out.

Nov. 13 was no better. I asked the loan processor for an update. She had none.

On Nov. 14, I wrote to the loan processor’s supervisor. She apologized that “you feel that you have not been communicated with” and promised a phone call.

The loan processor called — with more bad news: After the gas was turned back on, the water heater began leaking. It has to be replaced before the inspector would go out again.

And there was more bad news: The underwriters still needed additional documents: a letter explaining an outstanding student loan that my wife continues to pay, additional employment verification and “legible” copies of the original sales contract.

The loan processor, meanwhile, presented two more documents that had to be signed by Wells Fargo. I gave them to my Realtor to pass along.

The loan originator said he had “escalated” our file with his boss, the Las Vegas home loans manager. Escalated, like my temper?

•••

Losing it

The morning of Nov. 16, the water heater was going to be installed and the loan processor wanted to schedule the inspector to check on it that afternoon. Fine.

Then she dropped this on me: While she had received a quote from my insurer for home insurance, there was no formal record of a “declaration of insurance” in our file.

I trembled with anger. The past 15 days I had been asking: Is anything missing?

I demanded to speak to her boss. She transferred me — to voicemail.

After composing myself, I called my insurance agent and the declaration was sent within the hour.

But the water heater didn’t get replaced until after the FHA inspector’s second visit. That meant a third visit would have to be scheduled.

The loan manager told us we’d need another escrow extension to wrap up this short sale.

•••

Down the stretch

On Nov. 19, the water heater passed inspection. Still, Wells Fargo — the seller’s bank — had not returned the signed documents. The sellers agreed to a third extension.

The day before Thanksgiving, underwriters said they also wanted the short sale approval letter to be signed by Wells Fargo.

With the Thanksgiving weekend, there was no discernable movement by the banks. The next Monday, another person at Wells Fargo said he had reviewed the file, and while one of the documents requiring signatures was “fairly standard,” the other two Bank of America wanted were “ones we don’t typically see” and were under review.

Excuse me. We need to be out of our apartment on Friday.

“We’re reviewing those documents,” the Wells Fargo man said.

He would make no promises.

Over at Bank of America, they said they understood our frustration but nonetheless wanted the documents signed by Wells Fargo.

•••

Desperate times, desperate measures

We were up against the wall: We needed to be out of the apartment by the end of the week, but we didn’t have approval on the loan. Should we try to shove all of our belongings into the storage unit and move into a hotel? What about the dogs?

Maybe the sellers would let us move in early, as tenants. We asked; they agreed.

We moved in on Wednesday. The banks didn’t know.

The day of the move, Bank of America told us it would waive the need for Wells Fargo to sign two of the three documents it had earlier sought. At the same time, though, Bank of America found one of the sellers’ signatures on another document wasn’t legible. The sellers would have to re-sign it. Really?

They did, the next day. All we were now waiting for was the short sale agreement to be signed by Wells Fargo. We asked Bank of America to waive that requirement. The loan originator, in his denial, wrote, “We appreciate your patients(sic).”

•••

Uneasy ending

On Nov. 30 — the last day of the third escrow extension — Wells Fargo signed and returned the short sale letter to Bank of America. But there would be no loan approval that day. We were granted a fourth extension, this time through Dec. 7.

Because there was nothing left for us to do, the phone call we got on Monday, Dec. 3, caused a leap of excitement. The caller ID showed “Bank of America.” Loan approval?

Like Charlie Brown, we were convinced this time Lucy would let us kick the football.

Instead, an apologetic underwriter told us of yet another “overlooked” document. A few hurried phone calls to the Midwest and a couple of emails later, Bank of America had everything it needed to approve the loan.

Later in the day, Bank of America informed us: “Your loan has cleared underwriting for final approval. Before the loan can be submitted to the closing department for closing, the manager must complete the Loan Quality Review process.”

Say what?

It’ll be done within 24 hours, the bank told us on a Monday.

Tuesday came and went. Wednesday came and went. Nothing.

The loan documents finally arrived at the title company on Thursday, Dec. 6, for Lindsey and me to sign. And sign we did.

Finished!

Or so we thought.

Bank of America wouldn’t accept the documents. We signed and dated them Dec. 6. The bank had dated them Dec. 7.

We returned on Dec. 7 and spent a half-hour signing them again.

That afternoon — eight months to the day after we had made our offer — the deed was filed with the county.

The sale was final. But don’t call it a “short sale.”

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  1. It's a shame you had to deal with such ineptitude on the part of the lenders. Our short purchase, which closed late August, 2011, went so smoothly that we wondered what all the fuss about buying a home was all about. Of course, we didn't deal with lenders like Wells Fargo or BofA, which was our bank at the time - we put an app in with BofA, received pre-approval, sent them all the requested documents ... and were then completely ignored by them. Fortunately, we had another lender on the line and were only applying with BofA to see if they'd give us a better rate. In the end, our short purchase was about 2-1/2 months from entry of bid to closing.

  2. We started our SS process on Jan 3, 2012.
    Our house had two offers to purchase it one day later (both for cash and both above the sale price). The SS was completed Spetember 2012 (9 months later). We had two mortgage holders. Both banks were terrible to work with. Our realtor said they were the worst banks she had ever had to deal with. Actually, we had Sen. Harry Reid's office step in twice with each bank to finally get the SS completed. If it weren't for Sen. Reid I believe we would still be waiting for a response from these banks. It is a very frustrating process, but we are SOO glad it is done.

  3. John,
    Well written article.

    Just glad it was not me and it's hopefully over.

    Indeed a true mess.

  4. It sounds like BOA, Wells Fargo and other large lenders aren't the way to go.

  5. Another of the thousands of reasons to boycott BofA

  6. The mentioned two banks BOA and WF says it all. I did a cash sale on a short sale and still waited 6 months. Same thing hurry up and wait BOA wanted everything now and them I waited for them to respond.I was living in NYS and the seller in Florida. Cutting through the story I had a home inspection done in May 2012 risking the possibility of loosing the cost of that if the deal fell through but hoping it would speed up the process. One week before the schedule closing BOA wanted $3,000.00 more from the seller and they were negotiating that with the possibilities of me having to help pay some of it. Well that worked out and finally we closed.Everything in the process was smooth until the bank got involved WE HAVE A BANKING PROBLEM IN THIS COUNTRY NOT A HOUSING CRISIS. So if you are going to do a short sale be prepared for a long wait and much frustration also start the process long before you need to move worst thing is the house sits empty for a few months longer before you move in but you save $$$ by not renting and storing stuff. One other thing at the end of the closing we were given 5 days to have the home inspection walk through and the money wired to BOA and the HOA info sent to read and approve even though each item had time limits such as 5 days for the inspection 3 days for the HOA stuff and etc. I knew the market had changed here and did not ant to go back and start from scratch so I as over a barrel.

  7. Appreciate sharing of story -- we had two accepted bids for the purchase of a couple short-sale homes in January/February of 2012 -- although the lien holder approved the sale within the escrowed 60 days on one home, the seller couldn't come to terms with lien holding financial institution's conditions which attempted to hold seller liable for unpaid balance -- we agreed to make a reasonable cash contribution (extortion payment) to seller at closing but apparently the amount wasn't enough -- seller wanted substantially more money than our purchase contract agreed to -- retrived escrow funds -- home went back on market and apparently sold last month at the substantially higher price --

    After nine months waiting on the other home, again the sellers/lien holders want substantially more money than what they had agreed to -- we retrieved our escrow funds while home currently remains on market. In both cases, substantially more and unacceptable amount of money than what was agreed to was requested from sellers/lien holders.

    Lesson: Short-Sale purchase agreements are not to be trusted, while buyers risk losing their escrow deposits (as damages) to sellers if buyers don't adhere to agreement there is nothing which holds sellers/lien holders equally accountable to buyers when contract terms are not adhered to by sellers -- understand those negotiating purchase agreement are the sellers, not lien holders.

    It is our contention that lien holders AND sellers should come to agreement upon price/terms PRIOR to being ALLOWED to place any home upon the open market for purchase -- buyers, sellers, realtors, escrow agencies, financial institutions, etc. would all be better off if short-sale pre-approvals were required from the sellers/lien holders before introducing homes to the market place -- much like loan pre-approval requirements for home buyers entering the market place -- allowing the "short" into the sale.

    : {

  8. Wells Fargo is without a doubt the WORST company in the WORLD to deal with!!!! I've had a 3 year battle with them over my house in Florida and it's still not settled. Of course, my contact with the bank "moved on" and no one else has a clue what's going on! Never again will I purchase a home!!!!

  9. well.. The only difference between my case and your case that I am still waiting on Bank approval. I started the process in May first week..!!!

    8 months and still waiting....!!

  10. Great article. I completed a short sale this past year that took 5 months to close. I went with Nevada Federal Credit Union as my lender, and they were great. However, we had to deal with BoA and Chase for the seller's end of it. The extensions were the most stressful part. And the day it was to close, a Friday, the deal was flagged because of a 2 cent discrepancy on the docs. I volunteered to drop two cents off at BoA, but naturally, that was too simple of a solution. An agonizing weekend followed being that the extensions were set to expire that coming Monday. However, I got the good news phone call, and I'm still recovering from that hangover. In the end, though, it was worth it, since the house was a smoking deal, and houses in my neighborhood are now selling at about 20-30% more than what I paid.

  11. My realtor just told me about one she closed that took a year and was a heartbreaker. When we bought in 2011 we looked only at properties that were ready to close upon agreement. A short sale means you have to negotiate with both the mortgagee and the mortgagor, a nightmare for all involved. Unfortunately, so many properties here are bought for cash that availability is reduced to these problematic properties for those needing to enter into or get out of one.

  12. Well written article. I was feeling sorry for you for awhile. I'm happy for you guys and the dogs that you got the home. I was lucky and did a traditional purchase on my home. I paid more because of financing and doing a regular purchase, but the process went smooth. I used quicken loans and they did a great job handling my purchase. I read different reviews on their refi process, but for a first mortgage they did me right. I havnt head a good story from anyone using boa or wells yet. What a surprise.

  13. The last short sale I did was a pre approved price, and I paid all cash, no loans. It only took 5 months..and they would not even give me a key to the property when it closed, and I left the full amount for closing in cash for 3 months, said to call a locksmith.. B of A changed the locks when it found the property was not occupied, their agent had no clue.