How much do you know about your SHORT SALE?

OK... How much do you know about your short sale? If you have been selling any real estate lately, you know that short sales are common in every area and state of the market. From what the people who know are saying, we need to get used to short sales.

I was in a meeting today with a senior VP for Bank of America. The meeting was pretty generic in nature in that much of the content was the company line on the general short sale subjects. One topic discussed hits home on a variety of levels.

That topic was investor approvals. From the Realtor standpoint, we think how hard can it be? Get an offer, approve it, close it. I didn't know this but any loan could have multiple investors. It is not uncommon for a loan originator to sell different components of the loan to specialty investors.

The VP spoke of a scenerio of a first loan with 4 investors and a second loan with 3 investors. All different. All with a stake in the loan. Each has to agree on a settlement for a short sale to be approved. This explains why it takes so long in many cases to get an approval. It also explains why in many cases approval is not agreed to by the investors.

If you read my last blog, it spoke to the IndyMac/FDIC "arrangement" for shared loss in REO properties and how the investors have monetary incentives to foreclose instead of modify or agree to a short sale.

The question I had for the VP was.. "What is the obligation of the bank to disclose who the individual investors are in a short sale transaction to the borrower/agents/buyer?" The borrower has never been told who these investors are for the most part. Maybe some are in bankruptcy. Maybe some are in a situation where they don't want to report a loss in a particular quarter. Maybe some want the property because of some sweetheart deal with the FDIC.

The reply was... "A listing agent should have access to that information."

Ok, that doesn't really answer the question. I was asking what the disclosure threshold is on the bank's part. You know... Truth in Lending, all that. The question went unanswered.

Ok, what is my threshold for disclosure about individual investors to my clients? What is the threshold for the Seller's disclosure to the Buyer? What is the threshold for the Buyer's agent to the Buyer? Do we say... "The transaction isn't really a transaction until the bank approves it... well not really the bank... well yes, the bank, and... oh yeah... there are a couple, three investors who have to approve it too... But that is just for the first... the second... you get the idea..."

I asked my broker to check with legal. They hate me.

I wish I had the answers. I am wondering about the clients who come back to us at some point in the future and say... "You never told me about that... here is my attorney's name and number."

I don't want to make this into anything more than it is... So, what do you think? Let me know.

How much do you know about your short sale?

You can contact me via my website at www.bigmark.net You will find all kinds of interesting content there. Including the best search engine for civilians in the business. Search any listing in the MLS, even commercial listings and REO's.