One might think that with the collapse of the housing market and the global economy, realtors and banks might have some idea how to handle a short sale transaction. A short sale, after all, is when a homeowner sells their home for less than they owe on the mortgage in order to avoid foreclosure. Frank writes that he would like very much to move into the house he signed a contract to buy back in November, but the seller’s realtor forgot to submit documents to the seller’s bank, leaving the house vacant to be vandalized and deteriorate for months on end.
Since Congress recently extended the first-time homebuyer’s tax credit for people who had signed contracts by June 30 but had not yet closed, I thought I would take the chance to tell you the story of my own short sale nightmare, and ask your readers for advice on what to do.
I live and work in Washington, DC. Late last year, after looking over my savings and my rental costs, and incentivized partly by the tax credit, I put an offer on a house in the neighborhood where I am currently renting. My realtor told me the house was a short sale, a term I had not heard before, but one that means that the seller is selling the house for less than what they owe on it, and the bank will be required to approve the sale before it can be finalized.
On November 15, 2009, I signed a contract to buy the house. The seller’s realty company assured me that the bank, GMAC, had “pre-approved” the sales price, and that formal approval would come within a matter of weeks.
Months went by with no word, and by early March, there had still been no progress on resolving the sale. The seller’s realty company changed the person handling the project, and the new employee [redacted] told us that, somehow, they had never submitted the sales paperwork to the right online system for GMAC approval. Four months lost, and now we had to start again from square one.
In the mean time, the house had been sitting vacant, and had suffered some damage from vandalism. A local police officer later told me he had tried to contact the seller’s realty company to clean up the vandalized front and back yard, but that they had not responded. He was forced to file an official complaint against them to get them out to make the property respectable again. The seller’s realtors never told me this.
In May, we were informed that there was a “discrepancy” in some of the paperwork – that my accepted offer was not sufficient to cover certain “costs” associated with the sale of the house, and that we needed to come up with an additional $3,500. I was furious, of course. Both realtors offered to reduce their commissions by $1,000 and $1,500 each, and I increased the purchase price of the house by an additional $1,000 to cover the difference. All the paperwork was resubmitted.
In June, with approval from GMAC appearing more likely, we went ahead and scheduled the official home inspection. Before we could have the inspection, the water at the house had to be turned on (it was off as part of winterization efforts from the previous November). Each day for several days, we were assured that the water would be turned back on, and each day for several days in a row, it was not. I had to cancel multiple home inspections at the last minute, and ended up having to pay for a much more expensive inspector after my original, preferred one was no longer available after multiple cancellations.
When the water was reconnected by the water company and the seller’s realtors, it was done so improperly and a leak formed in the house. No one noticed this leak except for my realtor and myself, and we begged and pleaded for the sellers to come and manually shut off the water to the property to prevent damage. By the time they arrived, there was already a large crack in the kitchen ceiling from water damage.
After the house passed inspection, we looked to be free and clear. We scheduled a June 16 closing, and I got all my finances and paperwork in order, relieved to finally see the light at the end of the tunnel. On the evening of June 16, as I was seated at the table, pen over the closing paperwork, we received a call from the seller’s realtors, saying that had not received approval from the *second* mortgage holder on the property, Bank of America. Why not? They “forgot” to ask them for approval! So for the previous eight months, they had only been working toward approval for a short sale for one of the two mortgages on the property. Nevertheless, they assured me that they were in communication with the second bank and that formal approval would probably come in 24 to 48 hours, a week at the most.
It’s now been almost a month since that day, and we have no official approval from BoA. It’s not the bank’s fault, really – they’ve only had three weeks notice that this sale was going through. The problem is, the lease on my current apartment expires at the end of July, and I have to move out. Every day, I am assured that we are only a matter of days away from final bank approval, but it’s never true. And now, it looks like I will have to move out of my lovely apartment into “temporary” housing for who knows how long while the seller’s realtors continue to fail to resolve this sale.
Meanwhile, the house continues to sit empty, damaged from the water leak and vandalism, in the hot and humid DC summer.
The seller’s realtors claim they are doing everything that can be done, but I have heard them say that for the last eight months. I have emailed the short sale vice president at Bank of America – but have not heard back (disclosure: I only emailed him on Wednesday, so that’s not meant to be a criticism). I am completely powerless and out of options, and I am about to be kicked out of my apartment with no definite place to go.
I have no idea how to get this process moving and overcome the clear incompetence of the seller’s realtors, who clearly don’t know what they’re doing. What can I do?
Does anyone out there in the Consumerist Hive Mind have any helpful words for Frank? Leave them in the comments, or e-mail them to us and we’ll pass them along.