As if Short Sales weren’t complicated enough! After a deluge of complaints about the length of time needed to gain lender approval on Short Sales, deadlines are beginning to be imposed on lenders. As a result of these deadlines, some sellers’ lenders are now “requiring” (as a condition for seller’s lender’s written approval of the deal) that the Purchase and Sale Agreement be REDATED to show the current date as the offer date.
For example, you submitted an offer containing a Short Sale Contingency on January 10, 2010, the seller signed it on January 11, 2010 and it was sent to the seller’s lender(s) for approval. Today, the seller’s lender says they will approve the deal, but ONLY if you rewrite the offer with today’s date on it.
Why are some lenders requiring the change?
One reason is that lenders are tired of being perceived as the impediments and bottlenecks to the Short Sale process and want (doctored) documentation to prove how efficient they have suddenly become.
The main reason for the request, though, is money, of course. The recent HAFA (Home Affordable Foreclosure Alternatives) program is designed to help owners unable to retain their homes with a loan modification (HAMP) avoid foreclosure by completing a short sale or deed-in-lieu of foreclosure. There are monetary incentives for owners, loan servicers AND lenders to complete this process quickly, beginning 4/5/10. The owner can receive $3,000 for moving expenses, the loan servicing company can receive $1,500 for “administrative and processing costs” and the lender itself can receive up to a $2,000 match for allowing up to $6,000 of the sales proceeds to go to subordinate lenders.
In order to claim the HAFA incentives, though, the loan servicer must meet certain deadlines. When an offer comes in on a Short Sale listing, it must be forwarded to the servicer within three (3) business days, including the entire offer and all addendums, buyer proof of funds or pre-qual letter and all information about subordinate liens. Within ten (10) business days after the servicer received the RASS (Request A Short Sale) package, the servicer MUST approve or deny the request and advise the owner of the reasons for denial.
Hmmmmmmmmm….. The servicer got our offer shortly after January 11, 2010 and it’s now almost May. That’s a lot longer than 10 business days. No incentive money for anyone on this deal UNLESS the contract is redone with today’s date.
What’s an agent to do?
First, require that any such request be in writing and make sure this gets into the company’s files.
We could rewrite the offer with today’s date and have all parties sign it and promptly terminate the January 11 offer with a T&R disbursing the Earnest Money to the replacement contract for the same property. BHGRE Metro Brokers is suggesting that the following language be added as a Special Stipulation to the “new” contract: “Neither Better Homes and Gardens Real Estate Metro Brokers nor the _____ (insert Buyer or Seller, depending upon whom we are working with) object to the change of offer date on this Agreement provided that the Buyer’s lender, Seller’s lender(s) and closing attorney have no objection.”
But what if the parties do terminate the original deal and one or the other refuses to sign the replacement contract? Can you say, “Time to renegotiate”?
Anyone see any more potential problems?