Short Sales - Stopping the Sherriff's sale/Court Auction

Short Sales - Stopping the Sherriff's Sale/Court Auction

Attempting a short sale when a Sherriff's sale or auction is imminent is usually not a good idea, especially if the sale date is less than two weeks away. This can be a stressful and difficult process, and should not be attempted unless you have a legitimate, qualified offer. If you believe that you have such an offer, what follows is a step by step narration of an actual deal where I stopped a scheduled sale to allow time to get the deal approved and closed. Remember, the goal here is to stop the sale, not necessarily to get your offer approved. All we are doing here is buying time.

Example

Lila* is an agent who came to me with a deal recently. She had attempted to have a nationally known 3^rd party negotiation company facilitate a short sale for her, and had sent them this file in May. Do to inaction or incompetence by this company, a short sale was never completed, and a Sherriff's sale was scheduled for September 8. Lila contacted me on August 28 and asked for my help. She had a new offer and wanted to know if I could get it approved. I told her that at this time, getting the file approved was not the issue-stopping the sale was. Here is how I accomplished this task:

The Offer

Lila's new offer was for $550,000, with a 10% down payment and a $5,000 earnest money deposit. The total mortgage owed was a little under $700,000. American Home is the foreclosing (1^st lien) lender. There had previously, back in June, been a cash offer for $560,000, which was denied (supposedly) since the negotiation company was tasked with submitting this offer, we do not know for sure how or if the offer was submitted properly. Anyways, whether or not a past offer was accepted or denied is not relevant, because lenders will accept less as time goes on, so the lower offer did not concern me. I insisted on talking to the buyer's agent, and I explained that the buyer was going to have to provide me with proof of funds for the down payment, as well as a bank commitment letter. The commitment letter must be on bank letterhead, not issued by a mortgage broker. This is important, because it shows the shorting lender that the buyer is qualified and ready to close. I also suggested that the offer, on paper, be lowered to $535,000, to provide negotiation room. What I am doing here is setting up the bank for future negotiation, and I may even save the buyer some money in the process. Once that was complete, I turned my attention to the seller. Here is what my Net to lender Worksheet looked like:

Net to Lender Worksheet
Lender
American Home #3072XXXXX			$559,937
GMAC #835903XXXXX					$140,000
Total Payoffs					$699,000
Liens, Fees, and Taxes
Closing Costs					$16,750
County Taxes					$8,000
Realtor Commission				$26,750
Earnest Monies					$5,000
Total Costs					$55,500
Purchase Contract Price				$535,000
Net to American Home Mortgage					$475,500
Net to GMAC					$3,000
Net to seller is zero.

Notice that the net to the foreclosing lender (1^st lien), American Home, is $475,500. This is in sharp contrast to the offer price of $535,000. The net amount is the only number that matters to the lender. Too many agents get caught up in negotiating the offer price with the lender, and forget about the net. Consequently, not paying attention to the net is also the quickest way to not get paid on a deal. Also notice that I pay no attention to the 2^nd lien holder. They do not need to be contacted at this time because it was American Home, not GMAC that has foreclosed and scheduled the sale. The 2^nd lien is just along for the ride at this point and we will deal with them later, while we are in a power position.

The Seller

I had Lila present the seller with my contract and Authorization and also had the seller sign the offer. It is important to make sure that the seller is still cooperative, and is willing to go through with a sale. This time can be extremely stressful to a seller, and it is important that they are willing to complete the process. Once this is confirmed, I move to contacting the lender.

The Lender

Since it was obvious that the previous negotiator had mis managed the deal, I basically had to start over. Now, I know what you are thinking, "How can you condense the entire short sale process into a time space of less than a week?" Well, I take a cue from Nike and "just do it." It is critically important to note that if you are going to be successful at short sale negotiations at this level, that you change your mindset to become one with the following concepts: "Adapt, improvise, and overcome," "Where there is a will, there is a way," and "Never give up." I'm serious. You have to be a problem solver. Expect roadblocks to the thrown in your path. Expect doors to be slammed in your face. Expect to hear the words "no, I'm sorry that cannot be done..." Do not believe it, and do not accept it. Find a way to make it happen!

Here is how I made it work: I first called the common "loan workout department 800 number." I spent two days just getting my authorization accepted. I tried to use the last companies authorization, but was told that so much time had elapsed since their last contact, that the file was closed. I calmly and gently explained to the customer service rep that I was "retained" by the seller to get this new offer accepted. I use the word "retained" because it sounds important and urgent. I further explained that the sale was scheduled for the following week, and I really needed to speak with a supervisor. I was told that, of course since I had no authorization on file, that this was not possible. So, the question to ask is " Please give me the fax number, or better yet, the e-mail where I can send in my authorization. I was given this number and I told my helpful rep that I would send it in right away. Don't forget to ask how long it will take to show up in the system - in this case, 24 hours. I again asked for a supervisor, because, "since the sale was imminent, and we all want to avoid a foreclosure," so I could also fax my authorization directly to the supervisor. I was denied. What to do? Why, politely thank the rep, hang up, and fax my auth to the number I was given. Done? Not a chance. I repeated this scenario 3 times over the next hour until I got to a sympathetic rep, and was transferred to a supervisor. When you get a gem like this, always ask for the full name, direct contact number, and e-mail of whomever you are being transferred to, "just in case you get disconnected." I got 2 out of 3. After I was transferred to the supervisor, I retold my tale of woe. Since, of course, the supervisor could not pull up my authorization, (because I had just faxed it in - three times...) I asked if I could get her direct fax, to make sure she got it. Success! I faxed in the authorization and was told to call back tomorrow. After two days of this (never give up!) I finally reached another supervisor, told her my tale of woe, and bingo, she was able to pull up my authorization. Now I shifted to the heart of the matter: stopping the sale. I explained that this short sale was in the works for months, and that we had a new, legitimate, qualified offer. These words are important, so say them again. Legitimate, qualified offer. This gets their attention. Explain that you know that the sale if days away, and offer to send, direct to the supervisor, your offer, proof of funds, HUD-1, and net sheet. I got her direct fax, and sent them in. Day three. I call in to reach the same supervisor, she's not in. I call back, get another rep, tell the story, insist that I have already sent HUD, Net, Offer, etc, and that I alreadt have spoken to a supervisor. I was sent to a negotiator who promptly told me that "there was nothing he could do, that it was too late..." Bullshiot, I keep going, call again, get through to another rep, tell the story, get to another supervisor, tell the story, and told again, "I'm sorry, it's too late.." I do not accept this. I call again, and again, AND AGAIN. Sense a pattern? Finally, I get to another sympathetic ear, who transfers me to another supervisor, whom I once again tell my tale of woe too. She looks up in the system that the HUD and Net, and offer were received, and asks about my offer. I tell her, quite simply, that we can avoid this foreclosure, which nobody wants, by accepting this legitimate and qualified offer...she counters that the net of $475,00 is way too low, that their BPO is over $600,000.... Ok, stop right there. I explain that "this property has been listed for over 300 days, and that all of the offers are in the 550K range, and that is a pretty strong indication that the market is speaking clearly, and that you and I both know that 600K is not realistic." I also mention that hey, "we work on commission, so if we could sell for more, then, by golly we would, but this is what we have to work with..." I finally decide that it's time to drop some bombs here so I tell her, "You know, I think I might be able to get my buyer up a bit, but the sale is tomorrow, so if I can get you to suspend the sale, and give me enough time to work with you and my buyers, I believe we can make a deal here." She responds with, "if you are saying that your buyer is flexible, then perhaps we can work something out..." As Emeril is wont to say, BAM! I ask her again to please, suspend the sale so we can allow my legitimate, qualified buyers time to amend their offer, and oh, by the way, what is the number that you can make this work at...we can get this off all our books..." She responds by announcing that she is suspending the sale to review the numbers and order a new appraisal. TOUCHDOWN!

It matters not that we did not officially get an approval at this point. We can work on that later. The important thing is that there is a later. We have accomplished our goal and stopped the sale, and believe me, if a lender stops a sale to review the offer, the deal will get done sooner or later. The real lesson here is do not give up! Do not allow roadblocks and nay sayers to stand in your way. Find a way to make it happen!

*This is an actual deal, so the names have been changed