By Craig Knizek
The short sale process is universally derided as a grim, grinding affair not for the faint of heart. I often caution buyer clients that since the short sale process is so unpredictable and that since the lenders take so long to decide how/when to dispose of the distressed asset, it is often not in their best interest to try to purchase that type of inventory.
Despite all the aggravation inherent in short sales, I want to share a surprising and fun by-product of the short sale process. A buyer client of ours found a short sale property on CLIFDEN Street (remember that name, it’s important in this story) in a coveted area where there are very few available homes for sale.
The listing agent is a reputable agent who I know, and we’re working with a top-notch escrow firm. The listing agent also brought in a very experienced short sale negotiator, whom I also trust. So far, so good. We wrote a fair-market, well-documented offer that was below the mortgage lien on the property by only a nominal amount. We were told that the lender felt this short sale would not be a problem, and would move quickly.
Fast forward, or rather, move slowly to four months later, and we still haven’t heard anything from either the 1st trust deed holder, nor the 2nd lender. Meanwhile, the owner continues to not pay their mortgage, thus increasing the debt owed to both lenders. The owner has also moved out, creating an asset that will decline in condition, and thus further depreciate in value, costing both lenders more money.
Our buyer client stands at the ready, anxious to take this distressed asset off the banks’ books, pay back their non-performing loans with a new loan, and stop their bleeding. By taking so long to respond to our offer, the lender risks our buyer walking away. What buyer has the wherewithal to keep their family planning on hold for over 4 months? As Will Ferrell so wisely said in “Blades of Glory,” it’s “mind-bottling.”
The only way I can make sense of this is that the lender wants to foreclose so that they can wipe out the 2nd trust deed holder and recover a higher percentage of their loan (without having to share any of the proceeds with the 2nd trust deed holder). The Dodd-Frank Act, however, has created an environment whereby the large banks are highly discouraged from pursuing foreclosures; accordingly, 2nd trust deed holders are emboldened to hold out for something, anything, more than what they’d get in a foreclosure – which is nothing. So a stalemate is created, and the buyer and general market suffers.
Our clients, God bless them, decided to not just wait and wait and wait, but hope that if they could somehow humanize the process, they could convince that customer service rep in the asset disposition department to move the file along. So they baked cookies, they submitted nice notes, and, when that didn’t work, they wrote this song – entreating the lender to let them buy their dream home on CLIFDEN.
I’m hoping that this song will not only bring a smile to your face at our client’s creativity and predicament, but that it might also strike a nerve with someone, anyone, who can come to their senses and get this short sale done. We hope that the extra effort they put forth with the clever musical ditty will humanize the process and prompt the human behind the desk to do the right thing.
Scroll back up to the top of the post to play the song, or go here.
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