You Can Lose That Sacramento Short Sale Home After Acceptance

Everybody knows that short sales in Sacramento — or anywhere in the country, for that matter — can take a long time to close. That’s happens mostly because some banks and the PSAs take forever to respond.

But most of my short sales get approval between 6 and 8 weeks. Many receive multiple offers. An unfortunate aspect for buyers, though, is when buyers have patiently waited for months to get approval on the short sale, some other buyer can sneak in and outbid them.

It happens. It’s happened several times this year on my short sale listings. Now, you’ll hear that banks don’t want multiple offers, but that’s not always true. Depends on the bank. You’ll also hear that submitting more than one offer will hold up the short sale process, and that’s a fallacy as well.

Here’s a true story about how Sacramento Short Sale buyers lost their dream home at the 11th hour:

Let’s say this Sacramento short sale home was listed for $300,000. We didn’t receive a lot of offers, only two. One was, oh, $315,000 and the other, $318,000. At the bank’s request, we submitted both offers to the bank. Suddenly, after 3 months, we received another offer, completely out of the blue, for $350,000 from a third buyer. This happened at the same time we received short sale approval on the $318,000 offer.

We sent the new offer to the seller and the bank. The bank ignored the offer. The seller was livid. Her rationale was why should she have to pay taxes to the state of California on a higher mortgage debt relief balance when she was offered a better price! I explained that the decision was hers, and if she wanted the bank to consider the other offer, she should call the negotiator, as would I.

Turned out the bank approved the $318,000 offer because the BPO was $295,000. The bank was worried the home would not appraise at $350,000. (Shows you how much those BPOs are worth, especially when calculated by an inexperienced appraiser.)

The question was did the seller want to take the short sale approval of $318,000 in hand or did she want the bank to reconsider the $350,000 offer? Time was of essence. We were scheduled to close in 4 weeks. A new approval could delay the process. Due to HVCC, the buyer’s appraisal may be an issue.

In the end, the seller chose the higher offer and directed the bank to consider it. We resubmitted the higher offer to the bank on a Friday. By Tuesday, we had the new short sale approval at the higher price.

During this time, I notified the agent who had submitted the offer for $318,000, to give her advance warning. I didn’t want her to find out that her buyers were kicked out of the deal days or weeks later. That’s not how I do business. The agent immediately submitted an addendum, increasing her buyer’s price, but it wasn’t enough to beat the other offer.

Sacramento short sale buyers, please be aware that this can happen to you. You can wait months and months for approval and, lacking specific language to the contrary in your contract, some other buyer can kick you out at the very last minute.

Photo: Big Stock Photo

Tags: hvcc, lose short sale, mortgage debt relief, multiple offers, psa, short sale approval, short sale listings