Case Study: Road Bumps in Unexpected Places
We were able to successfully complete the following short sale in a little less than three months, but it was not without a lot of hard work and a few bumps in the road.
Owner-occupied, single family property in which the seller has experienced significant income curtailment. The property went under contract for the very first time on 7/9/10 and settled on 10/1/10 with a conventional financed buyer.
First Lien Owed: $384K (Conventional non-GSE loan serviced by Saxon Mortgage)
Second Lien Owed: $130K (Regular second serviced by Specialized Loan Servicing)
HoA Lien Owed: $3,800
IRS Lien Owed: $30K
Water Lien Owed: $700
Sales Price: $320K
First Lien: full release, no cash contribution or promissory note from seller
Second Lien: full release, $13K from first lien plus $13K promissory note from seller (0% interest, 10 years)
HoA Lien: full release, $1,625 from first lien, no cash contribution or promissory note from seller
IRS Lien: partial release, no cash contribution or prom note from seller
Water Lien: paid in full by loss mitigation company and title agent
The hard work…
The first lien initially allowed $3,000 to second lien and $0 to HoA lien. We had to escalate to get a new negotiator assigned to the file to get them to pay 10% towards second lien balance and $2K towards HOA lien.
Second lien initially asked for 30% of balance in cash, which we thought was absurd since we had gotten deals done previously at 10% of balance in cash for full release – we had to escalate and got the department manager to agree to 15% of balance in cash for full release. The seller was strapped financially, however, so we then settled for 10% of second lien balance in cash and 10% of second lien balance in promissory note for full release.
HoA lien initially was only willing to waive all late fees and penalties, it took a few times back and forth to get this reduced to $1,625. We ended up over-negotiating the HoA lien and shipped an extra $375 back to the first lien.
The IRS lien did not pop up at the time the property was listed. We only found out about it when the property went under contract. We were able to procure a partial release because the seller was strapped and had no means to settle the lien. We submitted the standard package to the IRS and then got a taxpayer advocate assigned to this file to help expedite.
We do not usually accept files with this many liens because the chance of success declines exponentially when the number of liens go up. But we always try to make lemonades out of lemon when we can. This file was even more work than usual, so the seller definitely got his money’s worth out of us!
The bumps in the road…
We had all approvals necessary from the above mentioned four liens as of 9/14/10, but needed to settle by 9/20/10 to meet all approval deadlines. The buyer’s lender was on board to settle by 9/20/10, but the buyer left town on 9/12/10 and would not return until 9/30/10! We couldn’t believe it as we had repeatedly told the buyer’s agent we needed to settle no later than 9/20/10 to meet deadlines on multiple approvals.
Because we couldn’t firm up the settlement date without receiving the IRS approval (expected prior to 9/20/10), the buyer’s agent ok’d her client leaving town for a 2+ week trip without uttering one word to us! Luckily we were able to secure short sale approval extensions from the first lien, the second lien, and the HoA lien quickly and without incurring additional penalties.
Throughout the entire process this particular buyer’s agent harassed us and expressed her displeasure with how slow we progressed at every turn…despite the fact that we were able to procure four separate approvals plus three approval extensions and get the deal to the settlement table in under three months!
On a separate note, the title agent notified us the day before settlement that he decided to leave town and promised us that he will thoroughly explain the file to his processor and his backup settlement officer. Well, it took us the entire morning on settlement day to get his processor on the same page with us regarding the final HUD. Worse yet, his backup settlement officer showed up to settlement two hours late due to traffic.
Adding insult to injury, the back-up settlement office realized at the settlement table there was a $700 water lien in their file that was not on the HUD (because it popped up a few days prior to settlement and the title agent forgot to mention to us). The seller promised to pay at the settlement table and the title agent agreed to let the deal settle. Since the seller did not pay the bill post-settlement, we ended up splitting the $700 water bill with the title agent.
Here is the kicker, the backup settlement office accidentally over-paid the buyer’s broker because he forgot to deduct the good faith deposit held by them. When he tried to get the over-payment back, he found out the buyer’s agent is a part-timer and not properly licensed to even get paid.
Who would ever imagine the biggest bumps in this deal were not with any of the lien holders, but with the buyer’s agent and the title agent! I guess the lesson here is take great care of the good people in your life because they make all the difference in the world between your success and failure.
Acacia loss mitigation is the only licensed credit service business to conduct short sales in the state of Maryland – last verified with the Department of Labor, Licensing and Regulation on 10/28/10. Acacia loss mitigation works with top short sale specialists in the state to help Maryland homeowners in short sale transactions. Visit www.MDShortSaleRealEstate.com to see the many success stories that one of the top Maryland short sale specialists has been able to achieve with our help.
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